Heparin Investigation Takes an Ugly Turn for Baxter, Industry

There's nothing like a picture of pig intestines being sorted in China to dramatize the fears that outsourcing is jeopardizing the safety of the US drug supply.

The picture to the right is just one in a series posted on-line today by the Wall Street Journal, showing the first step in the production process for heparin, one of the mostly widely used hospital pharmaceutical products in the US. (You can see the rest of the pictures here if you have the stomach).

You can expect those photos of the heparin production process to show up again, any time someone wants to question the impact of manufacturing outsourcing in the pharmaceutical industry. Like maybe when House Agriculture Appropriations Subcommittee chair Rosa DeLauro holds a hearing on drug safety issues (and especially the Trasylol controversy) February 27.

The photos accompany a lengthy discussion of the investigation into an apparent increase in adverse reactions associated with Baxter's heparin product, which has been recalled in the US. The Chicago Tribune also weighs in with a story including some comments from Baxter CEO Robert Parkinson.

Now, bear in mind that no one knows for sure at this point that the Chinese facility has anything to do with the heparin adverse events. Not that that will make too big of a difference in how much damage the story will do to confidence in FDA, the industry and the drug supply.

First came the embarrassing admission by FDA that it never inspected the plant in China that serves as one raw material supplier for the product in question. That prompted a key overseer of FDA--Michigan Democrat Bart Stupak--to call for the resignation of Commissioner Andrew von Eschenbach.

But Baxter may face some tough questions of its own--at least based on comments made by top agency enforcement officials during a Food & Drug Law Institute conference February 19-20. According to the Tribune, Parkinson says Baxter wasn't even aware that the plant in question was part of its supply chain, since it was a subcontractor to the firm Baxter relied on for bulk API.

David Elder, director of the agency's Office of Enforcement, pointed out that FDA believes it is the responsibility of the finished dose product manufacturer to assure the quality of its products. He was responding specifically to a question about components of medical devices, not heparin. But he pointedly expanded to his answer to include finished dose pharmaceutical manufacturers being responsible for their suppliers.

Deputy Chief Counsel for Litigation Eric Blumberg also discussed the agency's ability to hold individual corporate executives criminally responsible for allowing adulterated products on the market. The authority--known as the Park doctrine after a Supreme Court ruling upholding the principle--allows FDA to file misdemeanor cases against executives even if there is no evidence of intent or even knowledge of GMP violoations.

The principle, Blumberg reminded FDLI, is that an executive has at least the opportunity to prevent a dangerous product from entering the market, while consumers cannot protect themselves from a contaminated drug once it is in distribution.

If Congress does look more broadly at supply-chain responsibility, things could get really interesting.

Both the Journal and the Tribune quote American Pharmaceutical Products Inc. CEO Patrick Soon-Shiong, asserting the advantages of his company's approach to supply chain management. APP is the big winner (if there is one) in the heparin recall, since its product is now the only one available.

Soon-Shiong has been in the news before. APP was the subject of a front page story in the New York Times in 2002 because of its relationship with the group purchasing organization Premier; that was during a time when Congress was looking into GPO practices following allegations by small device manufacturers that they were being shut out of the market.

Before that, Soon-Shiong played a part in the controversy surrounding generic launches of Bristol-Myers Squibb's paclitaxel (Taxol). APP asserted that a patent it held on a cremaphor free formulation of paclitaxel should block generics of the Bristol product. The issue briefly delayed generic launches and prompted a Federal Trade Commission inquiry. (Bristol ultimately settled a series of antitrust claims regarding its patent defense strategies for several brands; APP was never charged.)

One last thing: APP also has first-hand experience with the challenges of global supply chain management. The company acquired its injectable generic product line from Fujisawa USA in the 1990s. Shortly after the acquisition, APP had to recall injectable gentamicin due to endotoxin contamination. The culprit? A Chinese raw material supplier.

Soon-Shiong should make an interesting witness...

DotW: Changin' Times

A quick review of the week's news suggests change is afoot. The Dow dropped below 11,000; the second coming of the Jesus phone occurs today (not that Apple needs press from us); and three pharma companies have teamed up to form a for-profit biotech called Enlight Biosciences to develop drug discovery enabling technologies. What next?

For starters, the FDA seems determined to play nice, admitting this week that although epilepsy drug come with the potential for suicide, that isn't enough to warrant a so-called black box warning. Is this the same safety conscious FDA we've come to know and love? Yes, apparently concerned that a warning label might cause doctors and patients to abandon treatment, an advisory committee voted 14-4 against adding the dreaded black box. (Almost certainly, they hadn't overdosed on Chantix.)

In another sign of its new openness, our august regulatory body has also decided to do away with the oxymoron, "approvable letter," which far as we can tell means the exact opposite. The FDA's new stamp of non-approval will be a “complete response” letter that “will describe specific deficiencies and, when possible, will outline recommended actions the applicant might take to get the application ready for approval,” the agency said in a statement. (We are waiting for the "incomplete response letter", but maybe that can't be tied to a PDUFA date.)

And there are shifts on the follow-on biologics front, as Insmed announced results of a study showing bioequivalence between its INS-19 compound and Amgen's blockbuster Neupogen. That could trigger renewed discussion of biogenerics legislation on the Hill. Neupogen, after all, rang up $1 billion in sales in 2007 alone.

Finally, BNet's David Hamilton believes that big changes are afoot at Pfizer, which continues to struggle with the new math of this century's blockbusters. According to Hamilton, "Pfizer is starting to restructure itself into into a marketing-centric, research-light drug company that will most likely be looking for acquisitions in order to restock its depleted drug pipeline." We can but hope. And who knows, perhaps generics--or at least the word diversification--will be part of is mantra. For more on Pfizer's strategy, check out Roger Longman's recent IN VIVO feature. (Coincidentally, Merck KGaA's CEO Karl-Ludwig Kley told the German newspaper Handelsblatt that his company's chemicals division, which makes liquid crystals and specialty chemicals, is 'part of our DNA,' indicating he rules out a sale of the business.)

If true, perhaps Pfizer can dodge Dylan's prophecy: "As the present now will later be past, the order is rapidly fadin'. And the first one now, will later be last. The times they are a changin'" Come gather round people, wherever you roam, it's time for...

Fresenius/APP and Fresenius/Galenica: The German health care products and services company Fresenius gets fearless investor of the week honors for wading into the heparin controversy via a $4.6 billion (at least) buyout of APP, and for following up by acquiring rights to Galenica’s injectable iron product Injectafer—currently “not approvable” at FDA following an advisory committee review that concluded that the drug has a mortality disadvantage compared to oral iron. Of course, there’s a nicer way of spinning things. The APP acquisition gives Fresenius Kabi, a “cornerstone” to build a hospital products pharma presence in the US—and does it at a time when APP is generating explosive profit growth since finding itself as the sole supplier of heparin in the US. Fresenius will be able to ride that wave—though it will also pay more for APP if profits are higher than projected. (You can read the deal terms here.) So far, APP has looked like the hero in the heparin story. The company has also jacked up the price of its product now that is the sole supplier in the US—as much as tripling the price—which could be a risky move given the political attention to the heparin market after Baxter’s catastrophe. (APP defends the price increase in part by noting that its product is still significantly cheaper than any possible alternatives like low molecular weight heparin or Angiomax.) The acquisition, though, may make it less obvious how big a windfall APP reaps from heparin, since its numbers will now be consolidated into the new parent. That could limit its political exposure.

The Galenica deal involves a different division of Fresenius, the dialysis services company Fresenius Medical Care. And the immediate focus is on Galenica’s two marketed injectable iron brands (Venofer and Ferinect). The two companies are creating a joint venture focused specifically on the dialysis market; and in North America a second agreement with Galenica’s partner Luitpold secures the same split responsibilities. Venofer alone is about a $250 million product in the US. And Fresenius will have rights to Injectefer if and when it reaches the market. Despite the regulatory setback, Fresenius says Injectefer “is expected to enhance the treatment of anemia in the dialysis patient population through the application of innovative drug administration techniques.”

Novartis/Speedel: A series of insider stock sales by executives of the Swiss biotech Speedel will add up to the acquisition of the company by its main partner Novartis. On July 10th Speedel said officers of the company, including founder and CEO Alice Huxley, sold their stakes—totaling 51.7% of the outstanding shares—to Novartis at CHF 130 per share. Add to that Novartis’ existing 9.7% stake and the Big Pharma was obliged to make a mandatory public offer to buy the rest of the company’s shares. The acquisition—which values Speedel at about $880 million—is neither unexpected nor particularly expensive, especially in the light of Speedel’s recent stock market decline and the companies’ symbiotic relationship. Speedel in 1999 in-licensed its lead renin inhibitor aliskiren (Tekturna/Rasilez) from Novartis, and Novartis clawed back the drug in 2002 (a 2004 discussion of Speedel’s business model is here). Though successfully approved, the drug has underperformed, putting pressure on Speedel’s stock and disappointing Novartis. That said, the drug remains Novartis’ best post-Diovan strategy (that antihypertensive goes off patent in 2012) and even at $880 million analysts point out that the Big Pharma is essentially tapping the rest of Speedel’s renin-heavy pipeline for free.

Solvay/Innogenetics: We have a winner. Solvay trumped Gen-Probe's hostile bid for Innogenetics with a higher bid of its own, and Gen-Probe has no desire to counter the counter-offer. Analysts widely expected Solvay to up its original April bid for Innogenetics, which was only 5.75 euros a share, when Gen-Probe offered 6.10 euros-a-share in an effort to transform itself into the world's largest stand-alone moelcular diagnostics company. On Wednesday, Solvay announced it would pay 6.50 euros-a-share for the Belgian company--about $361 million--and Gen-Probe decided to take its ball and go home. For Gen-Probe, winning Innogenetics was always a long-shot. The San Diego company, which had 2007 revenue of $403 million and a market valuation of more than $2.83 billion, hasn't done an acquisition since 2003 when it bought Molecular Light Technology for $11 million. Solvay, meanwhile, is a much larger outfit with revenues of roughly $15 billion, and has the economic advantage of making a friendly offer in a stronger currency than the rapidly sliding dollar.

Thermage/Reliant: For aesthetic device companies, where sales and marketing account for the biggest costs and a number of the newer one-product companies find themselves bumping into each other at the physicians’ office, consolidation is the order of the day. Several weeks ago, Medicis purchased Liposonix. Now skin tightening firm Thermage has snapped up skin surfacing company Reliant for $95 million, paid in a combination of stock and cash. Together, these two companies, which offer complementary aesthetic technologies, had $137 million in revenues for the fiscal year that ended in March 2008, according to the press release announcing the deal. The tie-up solves a key problem for Reliant; it was running out of money, having failed to execute the IPO it filed in 2007, perhaps because of its steep post-money valuation, which was north of $200 million. Reliant will also benefit from Thermage’s unique sales model of deploying two separate sales forces, one selling capital equipment, and the other, the disposable tips its devices require. Almost certainly, Thermage’s disposables sales force can help push Reliant’s creams and skin care products.

Lilly/SGX: Lilly receives this week's award for opportunistic acquirer. On Tuesday, the pharma announced a $64 million takeout of its research partner, SGX Pharmaceuticals. Like many other biotechs, SGX has been in a pickle: As of Tuesday July 8, it was trading at a discount to its existing cash reserves--meaning investors believed the company was worth less than the number on its own bank balance. This wasn't always the case, but the company took a hit when its lead project SGX523, a MET inhibitor in Phase I, showed dose-limiting toxicities earlier than expected, and investors fled the stock. With a dwindling bank account and no hope of tapping the public market, SGX had little choice but to sell when Lilly came courting. For more check out this post from earlier in the week.

(A big thanks to fellow Windhover writers Michael McCaughan, Chris Morrison, and Mary Stuart for contributions to this post.)

Heparin Investigation: "Unsettling" Indeed

"We at FDA understand how unsettling this whole situation with heparin is."

That is how FDA Office of New Drugs Deputy Director Sandra Kweder wrapped up FDA's latest media teleconference discussing the agency's investigation into adverse event reports associated with Baxter's heparin multi-dose vials in the US.

Unsettling indeed. We have written previously about the ugly turn the investigation has taken, and things keep getting uglier.

Apart from the adverse reactions and potential shortage of a critical hospital product, the heparin story seemingly confirms everyone's worst fears about globalization (though no one knows for sure, the suspicion is that the adverse events result from problems with the raw material sourced from China), FDA (the agency got confused and didn't inspect the Chinese plant in question), and the overall safety of the drug supply (if we see any more pictures of pig intestines in China we are going to be sick.)

In case you missed the latest news, Baxter has now recalled all remaining supplies of the product, having received assurance that the only other supplier, APP, can meet demand in the US. And FDA has completed its inspection of the Chinese facility. The agency determined that it is no longer manufacturing API and--surprise surprise--that there are some "objectionable" issues with its Good Manufacturing Practices compliance.

FDA is not ready to issue a formal regulatory pronouncement about the Chinese facility. However, it did post the standard inspection report (an FD-483--inset above) on its website.

They say a picture is worth a thousand words. The inspection report probably won't do as much to shake public confidence in the drug supply as images of pig intestines at the start of the heparin production process, but for quality control professionals in industry, it takes just 642 words (allowing for redactions) to paint a devastating portrait of the facility.

Our favorite section:

"The inside surface of large, 'cleaned' [Redacted] tanks ...were very scratched, with unidentified material adhering to the insides and the inverted handles held liquid, which spilled to the bottom of the tank when it was uprighted. There was no written procedure showing that the tanks were dedicated to a particular process step. There was no data collected to verify marker and tape volume markings on the outside of the tanks and, the cleaning method was not validated. It was noted that equipment cleaning tags were made of paper and taped to the piece of equipment unprotected from liquids used in the processing room environments."

One prediction: that will definitely not be the last word on the heparin investigation.

Don't Blame China...At Least, Not This Time

Here’s some news: Baxter is discontinuing an injectable hospital product because of problems with a third-party contractor it relied on to supply the active pharmaceutical ingredient.

Heparin? Who said anything about heparin?

We are talking about the neuromuscular blocking reversal agents Enlon (edrophonium) and Enlon-Plus (edrophonium/atrophine).

The Food & Drug Administration announced the discontinuation of the drug February 29. The agency keeps track of product discontinuations and shortages to help alert providers to the need to find alternative agents. At a time when cost-cutting and consolidation are industry wide imperatives, these notices have become routine.

Still, you will forgive us for perking up when we saw the announcement about Baxter’s product the day after the company formally recalled all remaining supplies of its heparin product in the US.

It turns out that not all supply chain issues involve Chinese raw material manufacturers.

In this case, the third party supplier is Akorn Inc., which produces edrophonium for Baxter in Decatur, Illinois. Akorn has had some compliance problems of its own, receiving a Warning Letter from FDA last year—and then a follow-up inspection raised more concerns.

Enlon fell into short supply soon thereafter, with the American Society of Health-System Pharmacists alerting members to the issue in December. And on February 18, Baxter sent a terse letter to the trade announcing the discontinuation of the product.

The company notes that there is no relationship between this issue and the heparin investigation.

We can think of at least three critical differences. First, this is purely a supply issue; there have been no unusual adverse events or other issues associated with the product on the marketplace. Second, Enlon is not a widely used product (though, unlike with heparin, Baxter is the sole source provider of the drug). And third, this is a case where the supply chain issue followed an FDA inspection—not, as with heparin, the embarrassing discovery that FDA failed to inspect the right supplier.

But it is a timely reminder that the complexity of the pharmaceutical supply chain is not entirely a function of globalization. After all, Decatur is only about 200 miles from Baxter’s headquarters in Deerfield.

Globalization and its Discontents: Finger-Pointing Over Heparin

The US Food & Drug Administration's investigation into adverse reactions associated with Baxter's now-recalled heparin products is a major public health priority and a growing political liability for the agency.

It may also become another strain on relations between the US and China.

FDA is now confident that the reactions were indeed caused by a contaminant introduced into the raw material used by Baxter and its suppliers to produce heparin, a contaminant that FDA suspects was introduced deliberately somewhere early in the supply chain in China. The agency convened the latest in a serious of media conference calls April 22 to outline its findings so far. (Click here to read coverage of the conference call in PharmAsia News.)

Chinese regulators disagree, and called their own press conference at the Chinese embassy in Washington to make their position clear. They believe the problem is more likely the result of impurities introduced in the final production processes in the US, and plan to inspect Baxter's facilities themselves. (Here is The Washington Post's coverage of the press conference.)

Baxter, understandably, agrees with FDA's interpretation of events thus far. Assuming FDA is correct, Baxter's own liability for the adverse events will be less obvious: the company itself is presumably a victim of whomever is responsible for introducing the contaminant. (Though, as we have noted previously, the US Food Drug & Cosmetic Act is a strict liability statute that at least in theory allows for the punishment of Baxter simple because it ultimately introduced a tainted a drug.)

But the issue is a double-edged sword for the biopharmaceutical industry. If indeed the contaminant turns out to be a case of economic fraud initiated by an unscrupulous business in China, that may help Baxter, but it will also fuel the misgivings of many US consumers and politicians about the globalization of trade--and especially concerns about the perceived dangers of outsourcing to China.

The Democratic Presidential campaign is increasingly sounding some protectionist themes, and the political anxiety about the rise of China as an economic rival to the US is palpable. Then there is the sensitivity of the Chinese government to its global reputation, including outrage at the protests surrounding the Olympic torch relay.

We ink-stained wretches at the IN VIVO Blog don't fancy ourselves experts on international relations, nor do we have a crystal ball to say what if any difference the heparin issue will make in the great game of global diplomacy.

But we do know this: global pharmaceutical corporations--and investors seeking opportunities in emerging markets--have to factor in the political dynamics of globalization into their planning. If protectionists on either side win out, plenty of players in the biopharma sectors will be among the losers.

Dingell vs. Von Eschenbach = Fireworks

Apparently, House Energy & Commerce chairman John Dingell is unhappy with the Food & Drug Administration.

The Michigan Democrat took issue with FDA commissioner Andrew von Eschenbach's broad plan to overhaul the agency's overseas drug inspection structure to avoid another heparin situation during an E&C Oversight and Investigations Subcommittee hearing. Von Eschenbach was trying to explain that it's not just the number and frequency of inspections by inspectors, but how the inspections are carried out that matter.

Dingell was having none of what he called the commissioner's "toe dancing." Dingell, during his allotted time for question-and-answer, asked von Eschenbach to answer "yes" or "no" to a series of questions. The commissioner started off obliging Dingell but then began getting off track with longer, more verbose answers.

Dingell: I'm going to be honest with you, I'm establishing that you don't have the resources and you can't do your job.

The Energy & Commerce chairman asked if the $11 million for 2008 and $13 million for 2009 allocated for inspections was enough for FDA to inspect the thousands of currently uninspected facilities abroad which import food and drugs into the US every year.

Dingell: Does FDA need more resources to conduct inspections.

Von Eschenbach: Yes, sir. I've asked for more resources.

Dingell then pointed out that the Government Accountability Office estimated it would cost $16 million to inspect only Chinese exporters. So clearly, the $11 million and $13 million were not adequate, right?

Von Eschenbach paused and then answered: I'm telling you that we are putting [the resources] to appropriate use and I have requested additional resources to do more but I'm trying to make the point that in addition to doing more, we have to do it differently.

That set off Dingell, and recalled the Michigan Democrat's days when he skewered witnesses without mercy.

Dingell: You know, I've been in this business a long time, and I've had food and drug commissioners constantly tell me, 'Ooooh, we're going to have a new means of doing this, and we're going to be leaner and meaner.' Turns out that they're leaner and poorer and weaker and less capable of doing their jobs. And all of these promises that I get from commissioners...turn out to be nothing more or less than hooey.

Von Eschenbach: Mr. Chairman, if you allow me to...

Dingell: I didn't fall off the cabbage wagon yesterday. I've been talking to food and drug commissioners for 40 years. And you're not the first fella I've had to skin for not doing his job and coming up here and defending an indefensible situation. I want to maintain my respect for you but I can't maintain my respect for you if you keep toe dancing around the hard facts that curse you with the inability to do your job because you don't have resources.

Then Dingell asked von Eschenbach repeatedly exactly how much money FDA needs to inspect all of the outside facilities up to a US standard.

Dingell: I'm rather tired of all this toe dancing. You cannot do your job, you are not doing your job, how much money do you need to do it?

Von Eschenbach responded that he would have to submit a business plan to appropriately address the question but added that a rough estimate would be the number of total facilities multiplied by $45,000 (the GAO estimate per inspection).

That wasn't good enough for Dingell. "You are carrying water for an administration that has not given you the resources that you need. This committee wants you to have the resources that you need to do the job you have to do to protect the American people." He then brought up the deaths and adverse events related to Baxter's contaminated heparin. And started shouting. "You presided over this because you do not have the resources to do the job that you need to do. How much money do you need to do the job that you are supposed to do?"

Von Eshenbach remained calm and answered again in a way that did not calm Dingell's tone: "Mr. Chairman, I would like to have the resources that would enable us to do a systemic overhaul of the entire process, not a figure that's related to a cost per inspection times the number of facilities."

Dingell repeated again and again, slamming his hand against the desk, the question of exactly how much money FDA needed for the overseas inspections. "You have one fine scandal going on, you have others going on with regards to fish and fish products and you simply are absolutely incapable of addressing your responsibility."

In the end, von Eschenbach gave him the round figure for drugs: 3,000 facilities times $45,000 per site, which is $135 million. However, the sites are inspected once every two years, so the number really is about $70 million. The Republican Senate staff would later say it would take about 500 FDA inspectors overseas.

Dingell ended his fire and brimstone delivery with this: "Commissioner I have no ill will towards you. I have ill will of the most gross sort towards the fact that you come up here and defend a situation that is indefensible and that you are not soliciting the resources that you need to do your job to protect the American people the way the law says you should. And that you are tolerating an administration which is allowing this kind of situation to [continue] because they are too damn tight."

Von Eschenbach, for his part, handled himself well in the face of such a storm from Dingell and remained calm-not an easy thing to do considering the circumstances. But maybe next time, he should just say: $70 million.

The Heat is On...The Hill

It may be springtime in Washington, but things just keep heating up for FDA and the pharmaceutical industry on Capitol Hill.

Heparin safety, the overseas inspections process, DTC advertising, FDA's budget and the integrity of the agency's scientific mission have all been the subject of one or more hearings so far this year.

Indeed, one influential member of Congress alone—Energy & Commerce Oversight & Investigations subcommittee chairman Bart Stupak—has already held four hearings related to pharmaceutical regulation. That doesn’t count his hearing today on DTC advertising and a crowded schedule in 2007, which included a two-part series on drug safety and a four-part series on food safety.

Center for New Drug Evaluation & Research director Janet Woodcock has shouldered more than her fair share of that hearing burden, testifying several times already this year, most recently on the heparin crisis and drug safety in general. She acknowledges the stress of the schedule she’s been keeping on Capitol Hill, but hopes that her testimony has helped put some issues to rest.

“We’ve had a good show for ourselves, at least at CDER,” she says. “We can get criticized, but I think we have answered the criticism, and that’s what we need to keep pressing on.”

One positive outcome may be more money for FDA: Sen. Ted Kennedy (D-Mass.) supports increasing FDA's fiscal 2009 appropriations by $375 million over FY 2008, with larger increases for the next five years. Commissioner Andrew von Eschenbach may have dampened enthusiasm for that big of an increase, however, by telling the Senate Appropriations Committee April 15 that FDA could absorb an additional $100 million in funding in FY 2009.

But the attention isn't all upside: We’ve said it before, but when FDA officials are hauled up to Capitol Hill and bashed over the head for doing a poor job, that doesn’t reflect too kindly on the industries it regulates. Woodcock expressed hope that the attention will start to shift to other issues. “They will continue to have oversight hearings,” she said, but “Congress will become more interested in the electoral process very soon.”

Well, not quite yet. FDA isn’t appearing at Rep. Stupak’s hearing on DTC advertising—executives from Pfizer, Merck/Schering Plough and Ortho Biotech are testifying today. But that doesn't mean they won't be next. We hate to say it, but this is exactly the kind of attention that we (ahem) predicted would happen following the Vytorin/Zetia kerfluffle. Given Rep. Stupak’s preference to hold multiple hearings on a single topic, you can bet it won’t be the last word.

Has Drug Importation Finally Fizzled?

Senators Byron Dorgan and Olympia Snowe issued a highly upbeat press release today on the prospects for their drug importation bill, which they say they’ll reintroduce later this month. The headline on the release claims their bill “will finally pass Congress.” The release makes a point of noting that both President-Elect Barack Obama and Senator John McCain co-sponsored their bill the last time it was introduced in the Senate and claims that the new president “supports the legislation.”

But the rah-rah tone of the release is belied by a real lack of enthusiasm from the incoming administration. As a candidate for president, Obama’s health care platform initially said he supported importation, but after the drug-tainting scandals hit the press (think Chinese heparin), the campaign’s health policy advisor, Dora Hughes, made a number of appearances at which she did her best to let people know that was no longer the case. (See The Pink Sheet coverage of this topic).

And many Democrats who want to undertake major health care reform see re-importation as a small-ball distraction. New House Energy & Commerce Chairman Henry Waxman has felt that way for many years. (See here in The RPM Report.)

And yesterday in the HELP committee’s courtesy hearing with Obama’s nominee for HHS secretary, Tom Daschle, Bernie Sanders asked about his support for importation. Daschle’s response was evasive. Here it is in its entirety:

“You put your finger on the most important aspect of this effort, which is to ensure the confidence and safety of the drugs wherever they many come from. Many of our drugs today are manufactured abroad and imported as domestic product, even though they’re manufactured abroad. And so some consistent policy with regard to the manufacture and the sale of all of our drugs I think is in order. And I’d love to work with this committee and certainly with you Sen. Sanders to make sure that we come up with the best policy.”

If you can detect any hint of enthusiasm in that response, you have more sensitive ears than we do. It sounds more like a response to a question about making sure we don’t have more tainted heparin fiascos. If the incoming administration wanted to make drug importation happen, don’t you think Daschle would have said so in no uncertain terms? After all, this was a hearing full of self-congratulatory sentiment among Democrats after their resounding victory in November, not to mention warm and fuzzy feelings over the presence of Ted Kennedy, who’s in treatment for cancer, and Daschle, who was ousted from the Senate in an embarrassing defeat when he was Senate majority leader.

While the Dorgan/Snowe bill may well pass Congress, it wouldn’t be the first time an importation bill has made it through. The first time was back in 2000, when a Republican Congress passed legislation saying the HHS secretary could allow drug importation if the secretary could certify that the imported drugs would be safe and save money – and it was President Clinton’s HHS secretary, Donna Shalala, who refused to certify.

The Politics of Cost-Cutting: Pfizer Downplays Outsourcing in Letter to Congress

Investors urging Pfizer to make more aggressive moves in cost-cutting take note: Pfizer says it has not yet realized any savings at all from manufacturing outsourcing.

The company recently told Congress that “we have realized little, if any savings to date” from outsourcing of production. In a letter to Sen. Sherrod Brown (D-Ohio) Pfizer Vice President-Quality Gerald Migliaccio explained, “Pfizer has been very cautious in sourcing from emerging markets that provide lower cost.”

Investors have been complaining that the firm is not serious about cutting costs as its blockbuster revenue base erodes, and the fact Pfizer has off-loaded 17 percent of its production operations without saving a dime may be seen as confirmation of that critique.

Of course, there is more to the story. In this case, context is everything. Brown's interest in outsourcing is driven by the heparin contamination debacle, and he (along with plenty of his colleagues in Congress) is quite eager to make that into an anti-globalization argument. So this would not be a good time for Pfizer to brag about efficiency.

The correspondence followed Migliaccio’s appearance at a Senate hearing where he touted the rigorous auditing Pfizer conducts of its contractors (Subscribers to "The Pink Sheet" can read Pfizer’s argument about the limited utility of inspections).

Brown had asked Pfizer about the risks of outsourcing, and the company emphasized that when conducted well, there aren’t any safety issues. But the exchange, as well as the grilling Baxter has faced over heparin, should serve as notice to firms that any savings they hope to achieve by moving operations oversees needs to be balanced against the increased spending they will likely take on in order to demonstrate that those activities remain in regulatory compliance.

And this is also a case where timing is everything. Pfizer notes in the letter to Brown that it only now received its first approval of a facility to supply raw material to the US from China--and that it has not yet used that facility as a source for finished products. But it will--and, we suspect, it will do so at a meaningfully lower cost to Pfizer.

Still, although Pfizer’s policies may reflect the full oversight costs of outsourcing, they may not be bowing to the financial realities of the company’s current circumstances, where all eyes are focused on the looming Lipitor patent expiration.

We are not adherents to numerology, but we do think it’s worth noting that Pfizer has also made another 17 percent change to its operations that may not save it any money. The company announced last week that it would stop providing grants to for-profit companies as part of changes to its policies for continuing medical education. ("The Pink Sheet" delineates how the move reduces the firm’s flexibility but improves its relations with academics.)

The 17 percent of Pfizer’s CME funds that are now spent with for-profit firms will likely go elsewhere (did we mention the improved relations with academics?), so don't expect that change to improve the bottom line.

Speaking of the number 17, Lipitor was approved on Dec. 17, 1996, and accounts for about 34 percent of Pfizer’s U.S. pharmaceutical revenue. When it goes generic in three years, Pfizer will need a lot more than the two 17-percent solutions it’s already implemented.

– M. Nielsen Hobbs

Hard Time for Biopharma CEOs

Yes, times are hard for many biopharma executives. But we're referring to hard time in the other sense, as in time behind bars in a federal penitentiary.

If history is any guide, top executives across the industry should prepare for a wave of high profile enforcement activity from the Food & Drug Administration and the Department of Justice--cases where a civil settlement and fines may no longer be enough to satisfy prosecutors. It sure looks like the government wants to start putting people in jail.

The RPM Report has just published an article highlighting recent, not-so-friendly reminders from top FDA officials that they have immense power to pursue criminal cases against corporate executives--starting with the CEO--even if those executives did not participate in, or even know about, criminal conduct that occured on their watch.

Two officials quoted in press releases this week underscore that point. Here is the first:

“It is unacceptable that Americans have died and been seriously injured by what appears to be deliberate tampering. Whether this contaminant was introduced intentionally or by accident, the full force of the law must be brought to bear to bring those responsible to justice.”

That is Senator Edward Kennedy responding to FDA's announcement that it has identified the contaminant that apparently caused severe adverse reactions to Baxter's heparin products in the US. FDA still does not know if the contamination was accidental or deliberate, but note Kennedy's response: Accidental or not, someone must be held accountable. He underscored that point in a separate letter to FDA Commissioner Andrew von Eschenbach, asking for a criminal investigation.

Here is the second quote:

"Pharmaceutical companies do not run themselves, and those who engage in criminal conduct will be held personally accountable."

That is FDA Special Agent Kim Rice, quoted in a Department of Justice press release announce the indictment of Scott Harkonen, the former CEO of Intermune Inc., on charges of wire fraud and violations of the FD&C Act. The indictment follows from an off-label promotion and False Claims Act investigation settled by Intermune in 2006.

Intermune settled the investigation by agreeing to strict new codes of conduct and paying a fine of $37 million. That is a relatively large sum for a small company, but also is the type of fine that upsets some members of Congress who believe pharmaceutical companies are not been punished aggressively enough. Harkonen, on the other hand, faces a theoretical maximum penalty of 20 years in prison.

The company points out that the indictment of Harkonen, who left Intermune in 2003, does not in any way affect the settlement or Intermune's current business prospects. And of course we have no idea whether any of the allegations against Harkonen are merited.

What we do know is this: if the tough talk from FDA and Congress is to be believed, Harkonen will not be the only pharmaceutical executive brought up on charges.

Deals of the Week: Deal--or No Deal

The debate over Vytorin's medical benefits and, by extension, the utility of all cholesterol meds, continues to rage. Meantime, the Zyprexa marketing scandal reared its head: new this week, the NY Times reports Lilly is in talks with federal prosecutors to settle investigations into its marketing of the antipsychotic. If an agreement is reached, it could cost the pharma $1 billion, the largest fine ever paid by a drugmaker for breaking federal laws governing a medicine's promotion.

And, it was earnings week, with fourth quarter reports from Wyeth (up, but flat forecast for '08 due to generic Protonix), AZ (down), BMS (down, and WSJ's Health Blog highlights concerns that this big pharma may be affected by the sub-prime mess), Novo Nordisk (down, but did beat analysts' expectations sending the stock up), and Merck (down, thanks to Vioxx settlements) among others.

All in all, a crazy week, but not necessarily on the deal-making front. That's prompted this IN VIVO blogger to ponder the deals that happened--and those that did not. Without further ado, the Deal or No Deal edition.

First, a look at the actual deals that got done...

Inverness/Matria: On Monday Inverness announced its third major acquisition in the health management space, buying Georgia-based Matria for $900 million and the assumption of $280 million in debt. Definitely the big money deal of the week, though Wall Street reacted negatively to the news. Inverness continues to build through acquisition: the Matria deal is its twelfth in the past 12 months. (For more on Inverness's acquisition strategy, click here.) The company's recent emphasis on health management suggests another trend we've been following: the expansion of the diagnostic business model to include services not exclusively related to in vitro tests or reagents. Such business activity has muddied the waters stretching the definition of what it means to be a diagnostic company.

Sepracor/Nycomed: A few weeks ago when Nycomed got FDA approval for its inhaled corticosteroid ciclesonide we figured Sanofi-aventis, the original partner of Altana (bought by Nycomed in '06), still had US rights to the drug--we hadn't heard otherwise, after all. So we were a little surprised on Monday when Sepracor picked up rights to the drug (Alvesco) for $150 million upfront plus various development and sales milestones. Nycomed will also receive payments for manufacturing and royalties on sales. Alvesco's route to the US market has been chock-full of speed bumps. Way back in 2002 Altana suggested the drug might be approved in 2003, but an NDA wasn't filed until December 2003. Altana and Aventis received an approvable letter in October 2004 and the drug was launched in 2005 in Europe.

Iroko Pharmaceuticals/ Merck: Specialty pharma Iroko inked a deal with Merck for non-US commercial rights to Aggrastat, a drug used alongside heparin in patients with unstable angina to prevent cardiac ischemic events. Financial terms of the deal were not disclosed. This is the third product Merck has out-licensed to Iroko and the second in the beleaguered cardiovascular space. Last spring the company acquired rights to Indocin, for rheumatoid arthritis, and Aldomet, a hypertension treatment, from the big pharma. As we reported here, the independent futures of many spec pharmas are in question, as product-poor pharmas gobble them up in hopes of fattening their pipelines. Still, primary care remains a popular space for many, especially as big pharma eschews risky products in the cardiovascular and metabolic disease space.

(Clearly someone forgot the briefcase models.)

BiogenIdec/Genmab: Perhaps we should say "No deal, yet." This week BiogenIdec was once again in the news thanks to manueuvers by Carl Icahn to install three supporters onto the company's board. Also swirling in the ether, rumors that BiogenIdec intends to buy Genmab. Certainly, such a deal would scupper any attempts by Icahn to sell the company to another entity. Adding Genmab's pipeline would go a long way to securing an independent future for the Cambridge, MA-based biotech. But such a deal won't come cheap. In part, because it seems likely that GSK might up the ante. The British pharma, after all, has three partnerships with Genmab, including a very rich co-development, co-promotion deal for the biotech's HuMax-CD20, an antibody to treat cancer and rheumatoid arthritis. Until now, GSK's had no real reason to bring Genmab in-house--it's already got rights to the antibody cow's milk, after all. But it may not be willing to stomach the risk associated with a change in Genmab ownership, deciding its worth the hefty price tag to nail down its rights to its partnered products.

Lilly/Gastrotech: Deal or No Deal? Here's an odd one for you. On Jan 28, Denmark’s Gastrotech Pharma announced it was in-licensing Lilly’s GLP-1 analog GTP 010 for IBS and functional dyspepsia. That’s a deal, not a non-deal, surely? Well, depends on how you look at it. Simply turn it over and you get….a non-opt-in by Lilly.

Lilly and Gastrotech had been collaborating on GTP 010 since 2004, when Gastrotech took over Phase II trials of this Lilly compound in IBS and dyspepsia (in part thanks to the biotech’s ownership of some use patents for GLP-1 analogs in IBS, according to chairman Hans Schambye, though no, that wasn’t mentioned in the release).

That—four years ago--was arguably the real licensing deal. And that was also when Lilly received an option to later take over development and commercialization of the compound in return for milestones and royalties.

This week's news is that Lilly didn’t take that option, which means Gastrotech gets to keep the compound, instead, paying Lilly royalties. “Sure,” Schambye acknowledged to IN VIVO Blog, “you could look at it both ways. Either party could have licensed the drug.”

See? Hmm, exactly. Now ok, we know that small biotechs need all the positive spin they can get, but we're getting pretty close to "Press Release of the Week" territory here. Perhaps Gastrotech will do something big with 010, who knows (Lilly did take an equity stake). But please, a bit of clarity and objectivity wouldn’t go amiss.

Botox, Friday Afternoon Press Calls and the Nissen Effect

Blaming the media will never go out of fashion, at least not when it comes to drug safety scares.

Here is Schering-Plough EVP Carrie Cox, summarizing the battle to rebuild Vytorin after the ENHANCE debacle during its earnings call February 12: "Physicians ... understand that the furor around ENHANCE is largely a media driven event."

And GlaxoSmithKline’s recap of the Avandia meltdown of 2007: it resulted from a “distortion of the media” about the risk profile seen with the Type 2 diabetes drug, outgoing CEO JP Garnier said February 7.

There is no question that front-page headlines and national news broadcasts can do immediate and lasting damage to even the most well-established brands, damage that may go far beyond any appropriate medical response to new data.

But that only begs the question: what prompts some safety scares (or, in the case of ENHANCE, a failed efficacy trial) to create a media feeding frenzy, while others seem to pass with barely a ripple?

One answer, to borrow a phrase from religious themed bumper stickers, could be WWSNS: What Will Steve Nissen Say? There certainly does seem to be a strong correlation between the Cleveland Clinic cardiologist’s reaction to new data and the amount of play it gets in the media.

Wall Street seems to believe in the Nissen effect. In a February 11 note, Wachovia’s Larry Biegelsen argued that investors over-reacted to an “early communication” about a potential safety issue involving Allergan’s Botox. The issue, announced by FDA February 8, involved serious adverse events primarily associated with off-label use of Botox in children with cerebral palsy. Investors worried that a safety scare could significantly impact Botox widespread cosmetic use.

Not to worry, says Biegelsen. An “ENHANCE-like impact” on Botox use is “unlikely in our view.” Why? Well, for one thing, “Dr. Steve Nissen has not spoken out against Botox,” the way he did against Vytorin.

Talk about a case where silence is golden.

Biegelsen, of course, knows it isn’t quite as simple as that. Nissen’s silence is one of four factors the Wachovia analyst sees as reassuring differences between the Botox safety issues and the ENHANCE fallout. Only one is under the control of the sponsor: “There does not appear to have been any delay in the reporting of the serious adverse events.”

The other three involve reactions by external parties who have no formal regulatory role: (1) Nissen’s silence; (2) “Congress has not started an investigation into the handling of the Botox data”; and (3) The media coverage of Botox is more benign than the coverage of the ENHANCE data.

How so? “We couldn’t find a story in the print version of the New York Times on Saturday, whereas ENHANCE was front page news the day after the results were released.”

Of course, that last point is not entirely good fortune for Allergan. As we pointed out, FDA issued the “early communication” about Botox on Friday afternoon—part of what is becoming a pattern at the agency. (A safety update on Pfizer’s emerging blockbuster Chantix came out the week before Botox, and FDA’s first response to ENHANCE came the week before that.)

It so happens that Friday afternoon is the time least likely to generate significant news coverage. FDA swears there is no deliberate strategy to bury drug safety events. (At least, they assured Pharmalot of that—you can read more here.)

It certainly is plausible that FDA didn’t get all its ducks in a row to issue the early communications until Friday afternoon. We’ve talked to media savvy FDAers over the years (both in the press office and elsewhere) who routinely lament the review divisions’ habit of issuing approval letters at or after the close of business, often on Fridays, thereby all but assuring that even the most important new drug approvals would not be covered in the national news broadcasts, and sometimes even receive scant notice in newspapers.

The fact is that if FDA is not taking the news cycle into account when making safety announcements, it should be. Overblown safety scares do not serve the public health, so FDA certainly could justify Friday afternoon announcements as a way to better ensure that important new information gets into the public sphere in a more measured fashion.

On the other hand, the news media is the best way to amplify an urgent safety message. If that is the goal, the agency is better served by getting the news out early in the day and early in the week whenever possible.

In fact, that’s what FDA did on Monday February 11, when it announced that Baxter is suspending production of heparin due to severe adverse events--an announcement with urgent public health implications.

As far as we know, Dr. Nissen didn't weigh in on that one...

More Insulin Problems

Pfizer isn't the only company having problems with an alternative delivery form of insulin.

Emisphere Technologies has been working on oral insulin for more than a decade--and finally its board got fed up.

In October 2006, the company reported disappointing Phase II results with its oral insulin--no difference from placebo. The stock tumbled by more than 50%. By January the long-time CEO, Michael Goldberg, MD, was out. The firing was led by Mark Rachesky, who joined Emisphere's board in 2005 when his fund, MHR Institutional Partners, loaned the company $15 million, later changing the straight debt to a convert--at $3.78 a share. That's unprofitably close to the company's current stock price (and less than half the Emisphere price when Rachesky did the covert deal).

Goldberg was blamed for poor execution of the key trial (as well as the fact that the company hasn't made much progress in its nearly nineteen years of life). The original trial design called for the oral insulin to be tested in very sick but stable patients; to accelerate the enrollment, the company apparently relaxed the criteria. In a subsegment look at patients who met the original criteria--an often unreliable analysis--oral insulin apparently did perform well. But now the company needs a new trial to prove the point. And this isn't the first trial that wasn't well executed: its oral heparin test was hurt by a poor liquid formulation whose taste turned off patients.

The company is by no means dead--it's managed to hire a new CEO, Michael Novinski, the former president of Organon USA. And it's brought on a board of big-name diabetologists to advise it on trial design and execution. It's got a new formulation with apparently three times the absorption of the older version--thus reducing cost-of-goods and increasing patient convenience.

But oral insulin won't win on convenience. And it won't win by eliminating the pain of injections. New smaller needles make taking insulin relatively painless. The big advantage will be eliminating embarassment, says one insider: "What diabetics hate is at a restaurant having to pull up their shirt and stick themselves in the stomach with a needle." Exubera doesn't solve that problem: puffing on a big device is no less inconspicuous than sticking one's belly with a needle.

A pill should be a lot more acceptable. And yet that's not enough. The market for insulin reformulations is being shaved by better needle technology and by new products, like the injectable Byetta and the oral Januvia. And as Pfizer is learning from Exubera, managed care doesn't want to pay for convenience. Emisphere's product, to be truly important, will have to show better outcomes. It may be able to get on the market by showing equivalency to injectable insulin--but to make Emisphere, and oral insulin, a success, it will need to keep diabetics healthier, too. That's a much more expensive task than most proponents of oral protein delivery ever figured they'd have to accomplish.

While You Were ESCing

An escape to Barcelona sure sounds nice doesn't it? Alas for those who made the trip to ESC it was likely cardiology over crazy nightlife, stenting over sightseeing. Then again, maybe not.

The European Society of Cardiology congress kicked off in Barcelona on Saturday and runs through Wednesday. We hear it's pretty big this year? Let's just say it's not looking good for already-marketed drugs, even new-to-the-market drugs like Effient.

• Oh, RE-LY? Yep. Forbes' Matt Herper has the lowdown on the high marks for AZ's Brilinta and Boehringer's dabigatran. AZ press releases here, Boehringer's are here. And Reuters follows up with a piece about the regulatory challenges each will face.


• Meanwhile, Bloomberg reports on Sanofi-Aventis' otamixaban, which showed positive Phase II results against heparin and Integrilin in patients undergoing procedures to clear clogged arteries.
• Leerink Swan notes positive data out of BMS/Sanofi's high-vs-low dose Plavix trial (which missed its primary endpoint of reducing death, heart attack or stroke at 30 days) and the AZ data above and reduces its sales expectations for Lilly's Effient. How much? Oh, taking $900 million off sales in 2015. (Hat Tip Mike Huckman)

image by flickr user Xavier Fargas used under a creative commons license

The Beginning of the End of the User Fee Era?

In the 15 years since the Prescription Drug User Fee program was created, the biopharma industry and its investors have gotten used to a once-unthinkable proposition--that FDA would give a clear yes or no answer about the approvability of a new drug by a tight deadline.

That record of reliability now may be in jeopardy.

Given the agency's ongoing resource problems, Office of New Drugs Director John Jenkins has given overworked and overwhelmed review divisions the green light to do what was once unthinkable: miss PDUFA deadlines.

According to a story in BioCentury this week, Jenkins’ unofficial and unpublicized directive could result in FDA missing more than 10% of user fee deadlines this year. That may not sound too bad, suggesting only a minor slippage from the agency's official commitment under the PDUFA agreement to meet its goals for at least 90% of its applications.

But in reality, FDA's track-record on meeting deadlines has been very close to 100%.

What Jenkins is describing is a limited number of missed deadlines—only in cases when a division feels overwhelmed by its workload. But once you start missing deadlines, it becomes very difficult to get caught up. And it's not like FDA is being overwhelmed by new drug applications these days. Imagine what might happen if new drug applications were streaming into FDA like they were 10 years ago.

For industry, the beautiful thing about the user fee process is its predictability: on new drug reviews, FDA promises to give a sponsor an answer by a certain date. And if company executives ask for a meeting with FDA officials to discuss an application, they know they will receive one within a set period of time.

Up until now, user fee activities have historically been considered sacred cows at FDA: industry fees have increased at a healthy clip at each reauthorization of PDUFA. It’s been all the “extraneous” activities funded through congressional appropriations—like professional development and, until recently, post-marketing safety—that have suffered due to a lack of funding.

And these days, it seems like FDA is stretched to the limit. Between the inspections debacle, the FDA Amendments Act implementation, and the new “Safety First” postmarketing safety initiative, FDA “has more work on our plate than we can possibly accomplish,” Jenkins told BioCentury. “We are having to prioritize. We are having to set aside some things, hopefully on a temporary basis, until we can get adequately staffed.”

But hiring and training new staffers is no easy process, thanks to a lengthy and arcane procedure under current HHS guidelines. Mary Pendergast, a former deputy associate commissioner at FDA, discussed this exact dilemma during Windhover's FDA/CMS Summit in December.

“The FDA has to hire many additional people. But as any FDAer would tell you, the new rules imposed by the Department of Health & Human Services—which took away from the FDA the ability to hire its own staff—has caused a very difficult time for the FDA in terms of making new hires,” she said. “The system is so long that most competent people will have found a new job by the time the FDA tells them they want them to be hired.”

So far, Congress has turned a deaf ear to FDA’s resources woes, wanting promises of an agency overhaul before appropriating any more money. Capitol Hill has sent a clear signal on where it believes FDA’s priorities should lie, and it’s not in faster review times.

Congress wants FDA to hold advisory committess for all new molecules, or justify a decision not to in writing. The logistics of scheduling committee reviews within six- or 10-month deadlines make that a tall order. And the decision to delay an advisory committee review for Theravance's televancin demonstrates the real-world consequences of placing safety concerns (in this case, the integrity of the trial data) over PDUFA deadlines.

Then there is the focus on the preapproval inspection process. When that program was created in 1990, the first impact was a delay in approval for a number of pending applications while the agency hustled to conduct inspections of the facilities. In the intervening years, FDA has developed a list of exceptions to the preapproval inspection policy--and Congress isn't happy about that. Another reason for delays.

The bottom line is that folks like Reps. Rosa Delauro and Bart Stupak or Sen. Chuck Grassley are less concerned about missing a few deadlines than when FDA inspects the wrong heparin facility in China. Indeed, they are clearly uncomfortable with the entire user fee model--a fact that should give the biopharma industry pause.

Financings of the Fortnight: S-1 Storm

After a long drought, Financings of the Fortnight is back with the rain you crave. And after an even longer drought, a drizzle of biotech IPOs in late 2009 has raised hopes for a good crop of newly public companies in 2010.

At the top of the list, Movetis’ IPO took in €97.75 million [$147 million], propelling the GI-focused Belgian biotech/J&J spin-off to easily win this year’s Deal of the Year award in the Exit/Financing category. Some analysts are hopeful (check out our annual review of the industry’s financing environment from this week’s Pink Sheet and be on the look out for our general overview on 2009 biopharma trends in the January issue of IN VIVO), but the truth is there’s still a long way to go, especially given the post-IPO performance of some of these companies (besides Movetis, which is trading above its IPO price).

Omeros for example debuted stock at $10 in early October, but is now selling in the high $6s, tumbling as low as $5.40 (The company, which has a surgical drug delivery platform, has also been fighting accusations from its former CFO that it improperly billed the NIH for grants). So M&A still seems to be the ideal choice for investors looking for an exit, even if capital is hard to come by and disagreements over valuation may delay the transaction.

Nevertheless since our last installment of FOTF we’ve seen Aveo and Tengion file S-1s, bringing the total in 2009 to six biotechs making their first attempts at IPOs, joined by a few--including Alimera Sciences, Aldagen, and Codexis (on December 28)--which are trying for an initial public offering for the second time.

So what does this S-1 class of 2009 look like? Well, with the exception of a few, most of them are fairly young, between 5-7 years old. And a handful of these youngsters have raised close to or at least $100 million in venture capital, so there are likely many hungry backers waiting for a return on their investments. Regenerative medicine firm Tengion, for instance, has brought in $143 million since inception.

None of the 2009 S-1 filers have any products on the market, but rather late-stage candidates in the Phase II-III range. One interesting theme among the 2009 group was in-licensing from Asian partners. Cancer drug company Aveo Pharmaceuticals, Anthera Pharmaceuticals, which is involved in the cardio space, and antibiotics developer Trius Therapeutics have each established their pipelines or built them up through licensing agreements with Asian companies. Anthera, for example, has taken a couple of anti-inflammatory phospholipase A2 inhibitors shelved by Japanese pharma Shionogi and partner Eli Lilly and developed them for cardiovascular indications.

One final note—remember the days when the must have accessory for any IPO hopeful was the so-called validating deal with a Big Pharma? Well, none in the 2009 class has formed a collaboration with a Big Pharma or Big Biotech partner for a drug candidate. Sure Aveo has partnered its Human Response Platform with the likes of Merck and Biogen Idec, and Codexis has provided biomanufacturing services to several of these firms, but none of the biotech IPO filers have out-licensed any drug assets to these major players. --Amanda Micklus


Paul Capital Healthcare/Phase III Development Co.: Known for dozens of uniquely structured deals where it pays cash to a biopharma company--often in need of and having a tough time raising capital--and in return gets the rights to future royalties or revenues on drugs, Paul Capital Healthcare is now making a new venture in alternative financing for drug developers. PCH, which was founded ten years ago and currently manages $1.6 billion in dedicated funds and debt facilities, is staking newly formed Phase III Development Co. SARL (P3D) with up to $100 million. Not much has been disclosed about P3D, which was apparently set up to financially support and manage European clinical trials for pharmaceutical and biotech partners. Despite efforts to provide simplified and unified regulations for clinical trials in Europe, the adoption of the European Union’s Clinical Trials Directive in 2001 has instead caused more confusion, put a burden on research, and increased costs in order to comply. (According to a survey conducted by Applied Clinical Trials, the European clinical trials market was estimated at €20.3 billion in 2008 and will reach €30.4bn by 2012.) In return for its investment, P3D will receive some kind of compensation from its partner, such as milestones or revenue sharing whie it's partners access development capital and hedge development risk. And one firm is already taking advantage--P3D has signed its first deal with an unknown “major” pharma player to conduct studies for additional indications on an approved product.--AM

ZymoGenetics: On January 11, protein drug developer ZymoGenetics netted $90.9 million in a FOPO of 16.1 million shares (including the overallotment) at $6, lower (but not by much) than what the company’s stock has been trading at since late December. Proceeds will likely be directed towards commercialization of Zymo's recombinant human thrombin Recothrom. During 2008, its first year on the market, the drug only had sales of $8.8 million. But Q3 2009 sales alone were $8.5 million and ZymoGenetics estimates Recothrom currently has 15% of the topical thrombin market in the US, so maybe that Citizen Petition it filed with the FDA back in August questioning the safety of main competitor, King’s Thrombin-JMI, did the trick. The FOPO money should help Zymo with its newly procured responsibilities for Recothrom. Effective at the beginning of 2010, ZymoGenetics restructured its 2007 deal with Bayer, which originally had ex-US rights to the hemostat plus co-promote rights in the US post-launch for three years. Under the revised agreement, ZymoGenetics reacquired all geographic rights except in Canada, where Bayer will continue to market. As a result, ZymoGenetics will no longer receive $16 million from Bayer in ex-US regulatory milestones, but the biotech is also not responsible for $20mm in US sales bonus payments to Bayer. ZymoGenetics appears to be in a pretty good cash position. In fact, through the reworking of the Bayer deal as well as reviving a 2002 Novo Nordisk tie-up, ZymoGenetics says it expects to save $40 million. On September 30, the biotech had $91.3 million in cash and cash equivalents, plus it signed a very lucrative deal with BMS exactly a year ago for HCV candidate PEG-interferon lambda. Zymo received $85 million up front plus an additional $20 million fee, and to date has realized $95 million in development milestones.--AM

Regado Biosciences: This privately held biotech focused on developing aptamers as anti-thrombotics completed a $40 million Series D on Dec. 17. The round was led by a new investor, Edmond de Rothschild Investment Partners, with participation from previous investors Domain Associates, Quaker Bioventures, Aurora Funds and Caxton Advantage Life Sciences Fund. Regado said it would use the funds primarily to continue development of its lead program – REG1 for acute coronary syndrome – with an emphasis on completing a Phase IIb study already underway. Like all of Regado’s candidates, REG1 is a two-component drug system, combining an aptamer (RB006) with its complementary oligonucleotide active control agent (RB007), enabling both anticoagulation and then the restart of healthy clotting to avoid therapy-related bleeding complications. Last August, the Basking Ridge, N.J.-based biotech announced that REG1 demonstrated safety and efficacy in a Phase IIa trial comparing the candidate against unfractionated heparin in patients undergoing elective percutaneous coronary intervention. Regado previously raised $23 million in a Series C financing led by Caxton in 2007, and before that brought in $20 million in a Series B round co-led by Domain and Quaker.--Joseph Haas

BIND Biosciences: This largely under-wraps nanotechnology company made news on a pair of fronts recently, landing former Sequus Pharmaceuticals President Scott Minick as its new president and CEO on Jan. 11 and then announcing an $11 million Series C on Jan. 13 led by David H. Koch’s DHK Investment, with participation from prior investors Polaris Venture Partners, Flagship Ventures, ARCH Venture Partners and NanoDimension. As a managing director at ARCH, Minick was serving on BIND’s board of directors when the board asked him to take over as CEO. In an interview from the J.P. Morgan Healthcare Conference, Minick told IN VIVO Blog that his firm plans to use the Series C money to get BIND’s lead candidate, BIND-014 – a formulation of the oncologic Taxotere contained in a nanoparticle shell – into clinical development by the end of 2010. BIND uses its Medical Nanoengineering platform to attempt to develop safer and/or more efficacious versions of oncology, cardiovascular and anti-inflammatory drugs through differential delivery and controlled drug exposure to diseased tissue. “The idea being we get very high concentrations of a known, proven drug to the site of the tumor and, in preclinical models, [we] have demonstrated increased efficacy as well as improved safety,” Minick said. The involvement of Koch, an engineer, businessman and philanthropist heavily involved in the cancer research community, will give BIND access to a network of leading oncology clinicians, he added. “These are leading people that we want to work with as we design and execute our clinical trials, [and] as we consider the next products we want to bring forward,” Minick said. Established in 2006 around research into therapeutic targeted nanoparticles from Harvard and MIT, BIND previously raised $16 million in a 2007 Series B round led by Polaris and Flagship.--JH

image from flickr user millzero used under a creative contents license

Deals of the Week Takes Time to Travel

Like any conscientious time traveller, a biopharma needs to tread carefully around iterations of its current, past and future deal-making self. (Spoiler alert!) In the new sci-fi flick Looper, the younger version of Bruce Willis does a terrible job cultivating his present while tending to his future and reconciling himself to his past. But this week Celgene proved a bit more adept than the action hero at tending to its past and future self. The biotech bellwether disclosed a pair of early stage deals, while putting out positive data that helps justify its largest acquisition to date.

The biotech added two cancer deals, one to develop a Phase I immunotherapy with VentiRx and the other a research partnership with the Leukemia & Lymphoma Society (LLS). Celgene has now disclosed six partnerships this year, the most since 2007 when it inked 10.

Celgene will pay VentiRx $35 million upfront to develop Toll-like receptor 8 (TLR8) agonist, VTX-2337, in cancer indications. The two companies will advance the compound in a pair of Phase II trials in ovarian and head-and-neck cancer over the next few years under an exclusive, worldwide partnership. Celgene also gains an option to purchase the company. VentiRx is eligible to receive additional funding during the option period, including a potential equity investment by Celgene.

In-licensed from Array BioPharma in 2007, ‘2337 is an immunotherapy that directly activates human myeloid dendritic cells, monocytes and natural killer cells to produce high levels of mediators which orchestrate the integration of a patient’s innate and adaptive anti-tumor responses, according to VentiRx.

Celgene included a similar option to purchase in its deal late last year with genomics start-up Quanticel, which got $45 million upfront and sold an undisclosed amount of equity to Celgene. The biopharma gained exclusive third-party rights to Quanticel's platform, which conducts single-cell genomic analysis of tumor samples.

Likely even more long range than the VentiRx deal, the LLS partnership seeks to identify and fund blood cancer research projects. The idea is to use the patient advocacy group’s connections with academic research centers to advance the scientific and medical understanding of hematological malignancies. The partners will also work with biotech companies to help develop of novel treatments for blood cancer.

Defining its present and past, Celgene also helped make the case this week for its $2.9 billion acquisition of Abraxis BioScience, which was met with skepticism when announced in 2010, with the disclosure of positive Phase III data for Abraxane in melanoma. The company’s share price climbed nearly to $80 on the news. That’s close to its 52-week high, but Celgene still hasn’t broken out of the roughly $50-$80 range it’s been in for about six years.

Now that Abraxane has hit some milestones and has a slew of upcoming catalysts Celgene may not wish it could go back in time to undo the deal, although there were plenty of investors who wished it could do so in the deal’s aftermath.

Abraxane (paclitaxel protein-bound particles for intravenous suspension) has an Oct. 12 PDUFA date for the treatment of non-small cell lung cancer (NSCLC). An approval in NSCLS would be the first new indication for the drug since Celgene acquired Abraxis. At the time, Abraxane was already approved as a second-line treatment for metastatic breast cancer.

If it can successfully add NSCLC, along with melanoma and pancreatic cancers, Celgene is expected to build Abraxane into its next blockbuster franchise. Just modelling sales for second-line breast cancer and NSCLC, Jefferies analyst Thomas Wei expects Abraxane could hit more than $1 billion in sales by 2016 or 2017.

Still, Abraxane may be little help when it comes to Celgene’s long-term patent issues. The drug comes off patent in the U.S. next year, but newly approved indications would have five to seven years of protection, said ISI Group’s Mark Schoenebaum in a note this week. He expects Abraxane IP to hold up through 2020 in the U.S. Revlimid (lenalidomide) starts losing IP protection as early as 2019; it accounted for two-thirds of Celgene’s $4.7 billion in net product sales last year.

But as sci-fi aficionados know, when time travel is involved current and future selves often end up at odds, if not at outright war. Celgene needs to hit a lot of milestones including next week’s Abraxane PDUFA date and Phase III pancreatic data for the drug this quarter.

Celgene isn’t the only one working to get a glimpse of a rosier future. See who else is partnering up to do so in this week’s installment of . . .

Sanofi/Genfar: Sanofi chief executive Chris Viehbacher seems as good as his word when it comes acquisitions. Three weeks after identifying Colombia as an attractive emerging market to be in, he bagged the country’s second-biggest generics maker, Genfar. While in China last month at the World Economic Forum, Viehbacher identified Colombia, Vietnam and Indonesia as emerging markets that look attractive in terms of growth. On Oct. 2 Sanofi announced it was buying Genfar, which had total sales last year of $133 million, some 30% of that from outside Columbia. The purchase builds on Sanofi’s previous forays into Latin America comprising the $662 million purchase of Medley Pharmaceuticals, the big Brazilian generics maker, in April 2009, just days after the French company bought Mexico's Kendrick Farmaceutica. Genfar does business in Venezuela, Peru, Ecuador and 10 other countries. No financial terms were announced. Viehbacher has been diversifying the group since he took control in 2008 by acquiring small or mid-sized companies in areas including vaccines, over-the counter drugs and generics, especially in fast-growing emerging markets, such as Eastern Europe, Latin America and Asia. So, does the Genfar purchase mean Viehbacher – who has said Sanofi is open to “bolt-on” transactions of as much as €2 billion ($2.6 billion) this year – will soon announce deals in Vietnam and Indonesia? It would seem a safe bet. – Sten Stovall

Janssen/Astellas: J&J-owned Janssen Biotech beefed up its autoimmune pipeline by acquiring rights to Phase II Janus kinase inhibitor ASP015K from Astellas Pharma. Horsham, PA-based Janssen paid $65 million up-front in the Oct. 1 deal, which also includes development, regulatory and commercial milestones that could add $880 million to its value. Janssen would also pay double-digit royalties if the drug is commercialized. The deal covers the entire world except for Japan, where Astellas retains rights. Astellas has already conducted a Phase IIa study of the drug in moderate-to-severe plaque psoriasis patients, and will complete three Phase IIb trials already underway in rheumatoid arthritis. Janssen will assume all further development costs outside Japan after those studies are completed. The drug could be an eventual successor to Janssen’s top-selling Remicade (infliximab) and Simponi (golimumab), both of which are approved in RA, psoriatic arthritis and ankylosing spondylitis. No JAK inhibitor has yet been approved for rheumatoid arthritis, but FDA is soon expected to rule on Pfizer’s tofacitinib, with a PDUFA date of Nov. 21. – Paul Bonanos

Takeda/LigoCyte: The Japanese pharma is making good on its commitment to make vaccines a priority. Takeda will acquire vaccine play LigoCyte for an upfront payment of $60 million, with additional undisclosed contingent development payments. Late last year, Takeda announced the establishment of a Vaccine Business Division. To run the new division, Takeda hired the former director of vaccine delivery in the Global Health Program at the Bill & Melinda Gates Foundation, Rajeev Venkayya. Prior to the Gates Foundation, Venkayya was the special assistant to the President for Biodefense at the White House. With the Ligocyte acquisition, Takeda will gain a Phase I/II vaccine to prevent norovirus gastroenteritis, the only norovirus vaccine in clinical trials, according to the company. Novovirus is the most common cause of gastroenteritis and food-borne illness in the U.S. and the cause of about 200,000 deaths annually, mostly in developing countries. The norovirus vaccine uses LigoCytes proprietary vaccine-like particle (VLP) technology. Takeda will also gain LigoCyte’s preclinical vaccines against respiratory syncytial virus, influenza and rotavirus. LigoCyte management will join Takeda’ Vaccine Business Division and continue to operate in Bozeman, Montana. - Stacy Lawrence 

Evotec/Bayer: Two European pharmas forged a multi-target alliance to develop clinical candidates to treat endometriosis. Bayer Pharma paid €12 million ($15.5 million) up-front to enter a five-year collaboration with Hamburg-based Evotec, with a goal of discovering up to three clinical candidates and jointly bringing them through preclinical research. Bayer will assume development costs related to the drugs upon their entry into the clinic, and could owe Evotec up to €580 million in preclinical, regulatory, clinical and commercial milestone payments, plus low-double-digit sales royalties, if the drugs advance and are commercialized. Bayer already markets Visanne (dienogest), a once-daily oral tablet that treats pain and lesions associated with the disorder, as well as a variety of other women’s health products including contraceptives. Endometriosis, which most frequently afflicts women between 25 and 35, is said to affect 176 million women worldwide, including about 10 percent of women of reproductive age. – P.B.

Servier/Ethical Oncology Science: French drug maker Servier is again moving to bolster its oncology pipeline through a deal with the Italian biopharma Ethical Oncology Science, its second in-licensing deal in as many weeks. In the latest agreement, Servier has acquired rights to an early clinical-stage antitumor drug targeting Fibroblast Growth Factor Receptor 1 and Vascular Endothelial Growth Factor Receptor 1-3, the company announced Oct. 1. In exchange Servier will pay €45 million ($57.5 million) upfront for rights outside the U.S., Japan and China. In those territories, EOS will retain rights. EOS also stands to receive clinical and registration milestones as well as royalties. The focus of the development of the drug will be mainly on breast cancer, where it has demonstrated promising results in early human trials, according to the company. In an earlier deal, announced Sept. 20, Servier partnered with MacroGenics Inc. for an option to develop and commercialize Dual-Affinity Re-Targeting (DART) products from its bi-specific antibody platform directed at three undisclosed tumor targets. Servier paid $20 million upfront for an option to obtain licensing rights in markets outside the U.S., Canada, Mexico, Japan, Korea and India. - Jessica Merrill

Leo Pharma/Charité: The Charité, which started out in the 1700s as a plague hospital for the poor but now incorporates Berlin's university hospitals, one of the largest medical organizations in Europe, is to collaborate with Denmark's mid-sized company, Leo Pharma, to discover and develop new treatment options for patients with skin conditions like psoriasis and actinic keratosis. It’s a bold step for Leo Pharma, which has previously not been particularly active in forging scientific collaborations, and can be viewed as the next move in the company's quest to search for future growth opportunities. The partners will test treatment solutions that no one has explored before, and identify new therapeutic areas within dermatology for Leo Pharma, the company announced Oct. 3. The collaboration is billed as the first of five long-term research relationships that Leo Pharma wants to set up with external partners in four countries – the U.S., Germany, France and Australia - by the end of next year. The research will supplement Leo Pharma's own internal R&D activities.- John Davis

Theravance/Alfa Wassermann: Mid-sized Italian company Alfa Wassermann is continuing to focus its research on all things gastrointestinal by collaborating with San Francisco-based Theravance on the development of that company's Phase II 5HT4-agonist, velusetrag (TD-5108), in gastroparesis. There are few therapeutic options for the disorder, which is characterized by delayed gastric emptying leading to bloating, nausea and vomiting. Velusetrag has already shown significant prokinetic activity after once-daily dosing in 400 patients with chronic idiopathic constipation. Under the agreement, Alfa Wassermann will fund the velusetrag research program in gastroparesis until the end of Phase II, and at that point will have an exclusive option to license the product for further development and commercialization in the EU, Russia, China, Mexico and certain other countries. Theravance will retain full rights to velusetrag for the U.S., Canada, Japan, and certain additional countries. If Alfa Wassermann exercises the option, Theravance will receive a $10 million fee and could receive further development, regulatory and sales milestone payments totalling up to $53.5 million, the two companies announced Oct. 2. Theravance could also receive royalties on net sales ranging from the low teens to 20%. Alfa Wassermann, a private Bologna-based company with revenue of €335 million ($434 million) in 2011, is best known for its gut-selective antibiotic, Xifaxan (rifaximin), which is marketed in more than 30 countries. It also markets a low molecular heparin, Fluxum (parnaparin), and a heparinoid, Vessel (sulodexide), and has ambitions to extend its direct presence in the EU and emerging markets. Theravance markets the injectable antibiotic, Vibativ (telavancin) in the U.S., and is collaborating with GlaxoSmithKline on the development of a combination COPD product which has completed Phase III clinical studies.- J.D.

BioSante/ANI Pharmaceuticals: In perhaps a last-ditch effort to derive value from development-challenged, female sexual-dysfunction drug LibiGel (transdermal testosterone gel), BioSante is undertaking a reverse-merger with specialty branded and generic pharmaceutical company ANI Pharmaceuticals. Each company’s board of directors has approved the proposed all-stock transaction in which ANI shareholders would end up owning 53% of the combined company and BioSante shareholders the remaining 47%. The deal, announced Oct. 4, also includes a contingent value right tied to the potential sale, transfer or licensing of LibiGel that could yield up to $40 million for existing BioSante shareholders. After Phase III trial data were clouded by a higher-than-expected placebo response, BioSante was left to design new pivotal studies for LibiGel, intended to address female hypoactive sexual disorder, that would ameliorate the placebo effect. In July 2011, the Illinois-based firm raised $45.1 million in a follow-on public offering, selling 16 million shares at $3 per share to fund continued development of LibiGel. The new company will be called ANI Pharmaceuticals, Inc., with existing ANI President and CEO Arthur Przybyl at the helm. Przybyl also will hold a seat on the board of directors, along with four current ANI directors and two from BioSante. The new company will seek to out-license LibiGel and put BioSante’s cash toward ANI’s niche branded and generic drug business, which generated net sales of $16 million in 2011. BioSante also brings a pipeline of cancer vaccines being investigated in 17 Phase I and Phase II trials to the new entity, while ANI has a contract manufacturing organization. - Joseph Haas

Flashing back to 5AM? Trippy alarm photo courtesy of loopoboy 2.0.