WTF? Regulatory Victory for Vanda's Iloperidone after FDA U-Turn

Does the approval of Vanda's iloperidone (now given the 'just for you, crazy sportsfan!' name of Fanapt)--deemed Not Approvable by FDA only nine months ago--signal a shift at the agency around use of comparative effectiveness considerations in approval decisions?

The atypical antipsychotic was approved yesterday for acute treatment of adults with schizophrenia, and marks a significant turnaround from last July. As we wrote then:

The company and its rejected investigational atypical antipsychotic drug iloperidone appear to be a marker in the ongoing debate over whether FDA is increasingly using a comparative efficacy standard when considering new drug approvals.

There was plenty of reason to draw that conclusion. Though Vanda said FDA deemed the drug effective against placebo and having similar efficacy to Pfizer's Geodon, it was concerned about how the drug fared against other comparators, specifically Lilly's Zyprexa or J&J's Risperdal. It also wanted more safety data on the drug's higher, 24mg, dose. The agency was requiring further studies, Vanda said.

Remarks by FDA's 'dean of the drug approval process' Bob Temple at an Institute of Medicine meeting only days later seemed to support the notion that comparative effectiveness was becoming a standard hurdle in certain crowded drug classes. He clarified those remarks in an interview with RPM Report's Ramsey Baghdadi a few days later.

“At the IOM, I was explaining what I perceive drug companies to be perceiving and doing, not describing an FDA standard. That is what I was referring to when I said that ‘It’s getting harder to develop the third, fourth, fifth, and sixth member of a class of drugs because when there’s a generic available [within a class], people are inclined to use the cheap one. ...

"It seems apparent that in my statement I was referring to my impression of what companies are doing to have a commercially viable product when there is a generic available for the drug class, and was not referring to any FDA requirement. In most settings, especially for symptomatic treatments, we do not get or ask for comparative data and are perfectly willing to approve a drug that is shown effective."

And in the end, FDA didn't require the kind of large and expensive head-to-head trial that seemed on the cards for Vanda. In September 2008 Vanda reported it had met with FDA to make its case, and that it would file a complete response to FDA's letter. In November, the agency accepted the resubmitted NDA with a decision deadline of May 6, 2009.

It has been far from smooth sailing for Vanda in the meantime. The company did some December restructuring and earlier this year has spent time fending off activist shareholder and 15% Vanda owner Kevin Tang, who proposed back in February to install himself and a colleague at Tang Capital Management on Vanda's seven-member board, presumably to facilitate the liquidation of the company that he has been calling for. The situation escalated only a month ago (See The Pink Sheet Daily for details.).

And yesterday came the approval--hardly a nuisance for Tang, considering the biotech's shares were up more than 800% (yes, EIGHT HUNDRED, that's not a typo) in after-hours Nasdaq trading. Maybe he'll send flowers. (UPDATE: Vanda says Tang has formally withdrawn his proposal to replace the board and call for a shareholder vote on liquidation. Still no word on flowers.)

So what on earth has changed? Vanda's case to FDA must have been convincing. Today the company is trumpeting Fanapt's mild effects on weight in a space where weight gain is a significant issue, and the way patients often switch between antipsychotics--making any safe and effective option worth having.

Does that explain the U-turn? Given the stock's movement, clearly few investors were betting on a happy FDA outcome for Fanapt. Perhaps more complex, political forces are at work?

image from flickr user mag3737 used under a creative commons license.

Antipsychotics and Comparative Effectiveness: FDA's Temple Explains Vanda "Not Approvable"

Pay attention to Vanda Pharmaceuticals.

The company and it's rejected investigational atypical antipschotic drug iloperidone appear to be a marker in the ongoing debate over whether FDA is increasingly using a comparative efficacy standard when considering new drug approvals.

“We are disappointed by this response, but will meet with the FDA to discuss this decision further,” Vanda Pharmaceuticals CEO Mihael Polymeropoulos said in a statement after receiving a “non-approvable” letter from FDA for the schizophrenia drug iloperidone, July 29.

Based on comments by FDA's dean of the drug review process, Bob Temple, there may not be much to discuss.

The atypical antipsychotic was licensed from Novartis after the Swiss company dropped it from development. Polymeropoulos previously headed up Novartis' global pharmacogenetics group before founding Vanda in 2003.

The FDA maintained that Vanda had demonstrated the effectiveness of iloperidone at 24 mg/day with efficacy similar to the active comparator, Pfizer’s ziprasidone (Geodon), according to the company. Vanda also claims the agency confirmed a prior study’s results that iloperidone was better than placebo in patients with schizophrenia at doses of 12-16 mg/day and 20-24 mg/day.

But FDA turned the drug away due to its lackluster performance versus Johnson & Johnson’s atypical risperidone (Risperdal). The agency, in its letter, said Vanda would have to conduct an additional trial comparing iloperidone to placebo and including an active comparator such as Risperdal or Eli Lilly’s olanzapine (Zyprexa). The company will also have to generate more safety data for the higher dose.

FDA has been assailed recently for going beyond its statutory obligation of approving and rejecting drugs simply based on its mission rooted in a singular question: do the benefits outweigh the risks? Critics say FDA is adopting a comparative effectiveness standard for me-too drugs.

FDA Office of New Drugs director John Jenkins insists that assertion is absolutely incorrect and that FDA always bases approvals on the benefit/risk question. To read more, click here. However, not everyone at the agency has been nearly as insistent on that issue.

Temple, who oversees the office which regulates psychopharmacologic drugs and also serves as director of FDA's Office of Medical Policy, has warned sponsors of the higher bar for approval in the past for classes where there are already multiple therapeutic options. To read about our warning in 2007, click here.

At a July 30 Institute of Medicine meeting on evidence-based medicine and comparative effectiveness, Temple unexpectedly—and briefly—addressed the iloperidone decision—we think.

“It’s getting much harder to develop the third, fourth, fifth, and sixth member of a class of drugs because when there’s a generic, people are inclined to use the cheap one,” Temple said.

Temple tried to frame comparative effectiveness studies—specifically randomized clinical trials and not literature reviews or observational studies—as the best, and maybe only, way to get those drugs through FDA.

“So to get anyone interested in the next member, you almost have to be able to have some sort of advantage. It could be safety, of course, but I see more interest than ever before because the industry regularly didn’t look at this sort of thing in comparative studies for a fair number of drugs.”

Then he weighed in specifically on what we assume was the iloperidone decision.

“We have taken a couple of steps that I think are interesting. We’ve turned down new antipsychotic drugs because they didn’t seem as effective as the available therapy.”

He continued: “I can’t remember if that ever happened before or whether we didn’t have the [courage] but we did. We decided that it wasn’t good if you’re an acute schizophrenic in the middle of an episode to be treated poorly.”

Those sentiments make it extremely unlikely that Vanda will be able to get an approval without conducting a large, expensive, prospective, head-to-head comparative clinical trial outlined in the FDA letter. Temple made it appear that there would be little room for negotiation.

Now it’s up to Vanda whether they want to use the $65 million in cash on hand plus future rounds of raising capital to do the studies FDA wants.

The broader message to drug developers is you can go ahead and add antipsychotics to the list of drugs that will have a higher threshold for FDA approval.

Vanda/Novartis: ... And the Circle of Life is Complete

The surprise approval of iloperidone (Fanapt) earned back in May by Vanda Pharmaceuticals had a lot of people (OK maybe just us?) scratching their heads to come up with comparable instances of molecules that were dumped by pharma and eventually made it to market. Like our lion king friends here, they also had to crane their necks to see where Vanda's stock price went.

Sure there are some ex-pharma molecules that wind up getting on the market (you helped us come up with half a dozen or so), but there aren't a lot. And that's a fact that biotechs eager to in-license discarded pharma assets needed to reckon with.

Vanda's unlikely success with iloperidone continues. Last night the biotech announced it was selling US/Canadian development and commercialization rights to Fanapt back to Novartis, for $200 million, plus milestones and royalties. It's the circle of life!

Novartis is now responsible for the drug's development in the US and Canada, "including the development and commercialization of a long-acting injectable (or depot) formulation of Fanapt," says the release. Vanda keeps rights to both formulations outside of those territories and will pay Novartis a royalty, though Novartis has an option to negotiate for those rights. Vanda investors like the deal--the company's stock is up again (this time only 35% or so).

As a reminder, here's the molecule's long and colorful business development history: In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July. The FDA's 180-degree shift to APPROVED came in May 2009.

Has Novartis pulled off the old don't-want-it-oh-wait-actually-we-do-want-it before? Yes, with Speedel Group's Tekturna renin inhibitor for hypertension. That deal was a little bit more straightforward, and certainly designed with the claw-back in mind (Novartis eventually bought out Speedel for nearly $900 million, so it was more expensive too).

Iloperidone may not be the kind of asset that pushes Novartis to snap up all of Vanda in the same way. But after this drug's twists and turns, you'd be crazy to rule it out.

Deals of the Week Looks At Illumina’s Roche Rebuff: There Will Be Time To Revisit This Deal

With the news this week that shareholders of Illumina had rebuffed Roche’s efforts to expand and stack its board of directors, the latter withdrew its hostile tender offer for the company.

No surprises there. Illumina’s management has been stalwart in its belief in the company’s positioning and prospects for rebounding from the dent in its earnings resulting from the global economic slowdown and cutbacks in government spending for its genome sequencing equipment.  That view is obviously shared by the institutions that own its stock, who were unmoved by Roche’s most-recent $51 per share ($6.8 billion) offer.  Roche, for its part, tried to use Illumina’s market-weakened position to highlight the risks of the business. As we wrote in IN VIVO in February, its interest in Illumina is strategic, but also opportunistic.

At one point during the parties’ back-and-forth letter writing to shareholders, Illumina alluded to its being called “the Apple of the genomics business.”  But while Apple’s products appeal to a “seemingly endless consumer base,” Roche replied, Illumina’s sequencing tools serve a much smaller and highly regulated market.  “Not even Illumina has projected any surge in revenues from its products in any specific foreseeable time period,” it said.  “As a standalone company, Illumina’s future is far from certain… Roche has the infrastructure, expertise, sales force, and market share required to successfully bring Illumina’s products to the broader Life Science and Diagnostics market and the combined capabilities of our two companies will accelerate the transition of Sequencing into clinical and routine diagnostics.”  Fair points.

As we’ve written, the how and when of applying sequencing to clinical diagnostics is debatable, especially when trying to show that complex patterns of genetic differences – the kind that rapid and inexpensive whole genome sequencing can uncover – can help guide therapy decisions (see here and here). But there’s no debating the research interest, nor that Illumina is the market leader and a continuing innovator in the field.  And while competitors are selling and developing small, fast next-generation sequencing instrumentation for smaller sequence read lengths, including Roche through its own 454 Life Sciences unit, it’s fair to think that large research and clinical labs will continue to invest in the workhorse machines Illumina has placed so successfully, especially as the costs of whole genome sequencing continue to fall.

Roche has called its $51 per share offer a starting point for negotiations, suggesting it would go higher once it has access to Illumina’s internal documents.  Illumina has resisted, presumably because it does not think Roche would pay what it would want as fair value – and that it will be in a much stronger negotiating position down the road.

That’s called being a true believer.  We think Roche is, too – in both the technology and in Illumina itself.  However the next year or so shakes out, Illumina should remain a good fit for Roche, to round out its genomics offerings and provide a channel for them to the clinical community.  The question is only at what price. (The discussion could also revert to some form of equity investment plus collaboration, which is what Illumina thought Roche’s intention was when it first came calling last November.)  The tender offer is set to go away at 6 pm tonight, but the two are still negotiating. – Mark Ratner

As one hostile saga wraps, another unfolds. Read all about it in this week's edition of ...

Adimab/Gilead and Adimab/unnamed partner: Antibody specialist Adimab has built a business on drug discovery partnerships over the past three years, while avoiding drug development of its own. Numerous pharmas have struck discovery deals in which Adimab uses its yeast engineering platform to identify antibodies against specific targets, allowing Adimab to build a cash-flow-positive business without taking on any development risk. This week, the venture-backed company struck two new deals, although it released fairly few details about either. First, Adimab will discover antibodies against two targets selected by Gilead Sciences in exchange for an undisclosed up-front fee plus preclinical and development milestones and royalties, if either is commercialized. The companies did not identify a therapeutic area, nor did they release any further financial details. For its other deal, Adimab didn’t even name the partner, only saying that it will discover bi-specific antibodies against two distinct targets selected by the partner, which can commercialize one or more in exchange for technical milestone payments, licensing fees, clinical development payments and royalties. The arrangements with Gilead and the other stealthy partner join a long list of Adimab deals, including agreements with Merck, Roche, Novo Nordisk, Biogen Idec, Lilly, Genentech and Pfizer. Adimab’s backers include SV Life Sciences, Polaris Venture Partners, Google Ventures, OrbiMed Advisors and Borealis Ventures. – Paul Bonanos

GlaxoSmithKline/Human Genome Sciences: It's not quite a deal yet, but it looks like there might be a silver lining for GlaxoSmithKline from the weak sales of Benlysta (belimumab) for lupus. The big pharma now has the chance to buy its Benlysta commercial partner, Human Genome Sciences, and gain full ownership over Benlysta and two other drugs the two have in development. GSK disclosed an unsolicited bid for HGS April 19, offering $13-per-share, or roughly $2.6 billion. HGS’ board of directors promptly rejected the unsolicited bid, saying it does not reflect the inherent value of the company, and hired the investment banks Goldman Sachs & Co. and Credit Suisse Securities to explore strategic alternatives for the firm. The $13-per-share cash offer represents an 81% premium over the company’s closing share price of $7.17 April 18. It also represents a 66% premium over the 30-day trading average closing price of $7.83 and a 58% premium over the ninety-day trading average, according to GSK. Nonetheless, while HGS investors may be relieved to see an offer on the table that represents immediate and certain value, $13-per share is a far cry from where the stock was trading a year ago. Last April, the stock was trading close to $29, riding high on the FDA approval of Benlysta for systemic lupus erythematosus March 2011. But it’s not likely a white knight is going to step forward. GSK splits rights to Benlysta with HGS, and owns rights to two other pipeline assets: albiglutide, a once-weekly injectable GLP-1 agonist for type 2 diabetes, and daraplatib, an inhibitor of lipoprotein-associated phospholipase A2 (Lp-PLA2) in development for cardiovascular disease. That’s likely to deter a competing bidder and limit HGS’ negotiating power. The history between HGS and GSK is long, dating back to the SmithKline Beecham days. SmithKline Beecham partnered on with HGS in 1993 on rights to a gene sequencing technology. The companies expanded on that original alliance several times over. In 2006, GSK paid HGS $24 million for rights to belimumab. --Jessica Merrill

Cell Therapeutics/S*BIO: With an EU regulatory approval potentially on the horizon for Pixuvri (pixantrone) and Phase III trials ongoing for that drug as well as tosedostat, Cell Therapeutics might appear to have more than enough activity at the moment. But on April 19, it paid $30 million upfront to S*BIO Pte. Ltd. for global rights to JAK2 inhibitor pacritinib, giving the Seattle-based biotech three Phase III candidates in blood cancer. CTI will pay S*BIO $15 million in cash and issue $15 million in unregistered preferred stock convertible to common stock – giving the Singapore firm nearly a 5% interest in its partner – and could pay milestones up to $132 million and single-digit sales royalties in exchange for the Phase III-ready myelofibrosis (MF) candidate. S*BIO could realize approval milestones based on regulatory outcomes in the U.S., Europe and Asia, along with sales milestones pegged to reaching amounts such as $200 million, $400 million and $500 million in a calendar year. CTI is not the first company to partner with S*BIO on pacritinib. In 2009, Onyx Pharmaceuticals paid $25 million upfront to acquire an option to the compound, then known as SB1518, as well as another preclinical JAK2 inhibitor, SB1578. With the potential for up to $525 million in milestones, it was among the most lucrative biotech deals seen in Asia to that point. However, in 2011, Onyx declined its option on both compounds, returning all rights to S*BIO. CTI believes pacritinib, as a selective JAK inhibitor, should have a better safety profile than the only FDA-approved drug for myelofibrosis, Incyte Corp.’s Jakafi (ruxolitinib), a JAK1/JAK2 inhibitor launched in late 2011.—Joseph Haas

Eli Lilly/Vanda: In its first in-licensing transaction since 2004, Vanda Pharmaceuticals has acquired development and commercialization rights to a Phase I-ready neurokinin 1 receptor (NK-1R) antagonist from Eli Lilly & Co. for an upfront payment of $1 million and up to $99 million in milestones. The 2004 deal with Novartis gave Vanda worldwide rights to iloperidone, which FDA approved for schizophrenia in 2009; it is now on the market as Fanapt, though sales have been weak. Vanda, focused on central nervous system therapies, has only one other clinical candidate in its pipeline, tasimelteon (VEC-162), in Phase III study for circadian rhythm sleep disorders. In its deal with Lilly, announced April 16, Vanda acquires VLY-686, an NK-1R antagonist that demonstrated proof-of-concept for controlling alcohol dependence in an NIH study. The company said it will complete technology transfer related to ‘686 this year and examine the oral compound’s clinical profile, to determine potential indications for an early-development clinical program. In addition to the upfront fee, Lilly could earn up to low double-digit royalties on sales, up to $4 million in pre-NDA milestones and up to $95 million in regulatory and sales milestones under the deal.—JH

GSK/Aspen: GSK wraps up its final bulk OTC portfolio divestiture, selling 19 international brands to Aspen Pharmacare Holdings Ltd., leaving only the troubled weight-loss drug alli as GSK’s last non-core brand. For £164 million in cash ($263 million under the April 20 exchange rate), Durban, South Africa-based Aspen gets the rights to Dequadin sore throat lozenges, Phillips Milk of Magnesia, Solpadeine analgesics and Zantac antacids, among others, outside the U.S., Canada and Europe. Glaxo said April 20 the non-core OTCs divested to Aspen generated about $95 million in 2011 sales, or a little over 1% of GlaxoSmithKline Consumer Healthcare’s total business of $8.20 billion. GSK declined to provide a full list of the brands included in the Aspen deal. Aspen, Africa’s largest drug maker with a $145 million consumer products business, split the GSK transaction in two: its South African subsidiary acquired the products sold in Africa for about $32 million, while Aspen Global Inc. acquired the rest-of-the-world brands for about $231 million. Aspen CEO Stephen Saad praised the OTCs’ established brand equity and said they “will also provide impetus in territories where Aspen is seeking to grow critical mass, such as Latin America and Southeast Asia.”Full coverage of the deal is in "The Tan Sheet". -- Dan Schiff

Sanofi/Michael J. Fox Foundation: Sanofi has tapped the Michael J. Fox Foundation to run a Phase Ib clinical trial of a potential treatment for cognitive deficits in Parkinson’s disease. MJFF VP if Research Programs, Mark Frasier, said the situation was a unique one. “Sanofi approached us about this molecule that, for internal business reasons, they were not pursuing, but that they thought may have promise for Parkinson’s disease patients,” he added. MJFF will be responsible for costs associated with the trial, but Sanofi will provide the drug at no cost to the foundation, clinicians, or patients. The trial is expected to launch in the latter half of 2012 and data will likely be available in early 2013. MJFF will have all rights to the data and will be able to disseminate that information as they see fit. Sanofi will retain the intellectual property surrounding the molecule and will have the first right of refusal in further development of the compound, based on results of the study. Cognitive deficits like a shortened attention span, trouble multi-tasking, and problems with planning affect 60% to 80% of Parkinson’s disease patients. There are currently no treatments available to help patients with these symptoms. - Lisa LaMotta

Crucell/Royal DSM: Vaccine-maker Crucell N.V. and Netherlands-based Royal DSM have chosen to abandon biosimilar development through their joint venture, Percivia LLC. A spokesman for DSM tells us that "the Shareholders and Board of Managers decided on the restructuring following the lack of agreement on further joint investment in the Company." Crucell is part of Johnson & Johnson, and others have speculated that J&J was simply not interested in financing the JV, which was launched in 2006 and headquartered in Cambridge, Mass. The initial focus of Percivia was to combine DSM’s manufacturing technology with Crucell's PER.C6 cell line for the production of proteins and antibodies within the protein therapeutic and diagnostic field, but the company changed direction in early 2011 to pursue a PER.C6 technology-based biosimilars product development strategy for emerging markets. According to Crucell, all biosimilar work will be terminated. According to a report in BioSpace, thirty employees of Percivia have already been let go and another 10 will remain for the next 30 to 90 days while operations are wound down. Percivia will remain a legal entity for the purposes of continuing the existing PER.C6 technology licensing business, says DSM. –LL

Vanda's Iloperidone: Not Something You See Every Day

The recently and some-say miraculously approved iloperidone (Fanapt) from Vanda Pharmaceuticals is certainly a rare bird. (Full coverage of the approval in today's Pink Sheet ($), here.)

Rare in that, in just nine months, it went from not-approvable to FDA-approved.

But also rare because it is one of only a handful of unapproved assets out-licensed to a small biotech by a Big Pharma and which eventually found its way to the market. (This phenomenon was pointed out to us by eagle-eyed IVB reader and COO of Versant's EuroVentures incubator Tom Woiwode. In fact, iloperidone was out-licensed by TWO pharmas, but we'll get to that in a minute.)

In any case, we agree: despite the interest among VCs in backing ex-Big Pharma assets and spin-outs, and Big Pharma's seemingly increased willingness to part with shelved assets, few have so far meandered their way to market a la iloperidone.

Of the ones that have there have been some doozies, though.

Cubist has built its anti-infectives business on the back of the success of Eli Lilly's unwanted antibiotic daptomycin (now sold as Cubicin), for example. Actelion's bosentan (Tracleer)--a blockbuster on the market to treat pulmonary arterial hypertension--began life at Roche. And Novartis' first-in-class renin inhibitor aliskiren (Tekturna) was championed by Speedel Group founder Alice Huxley. The drug's clinical successes led Novartis to pick up its option to market the drug and eventually to buy Speedel in July 2008 in a deal valued at nearly $900 million.

Surely we're missing some, so please let us know in the comments. But we think the point remains: few drug candidates, once abandoned by their original Big Pharma developers, go on to reach the market. At least so far.

There have however been other pharma-to-biotech success stories (or qualified successes, like Adolor/GSK's alvimopan (Entereg) which was originally developed by Lilly). Some deals involved geographically restrained smaller pharmas without the urge or wherewithal to compete in every market. For example Cephalon licensed modafinil in 1993 from French pharma Groupe Lafon and wound up acquiring the pharma in 2001 on the back of Provigil's success. And after all, a drug doesn't need to be approved to spark a solid return for a biotech in-licensor.

Just ask Vicuron's investors. That company's pipeline included the antibiotic dalbavancin and the anti-fungal anidulafungin, the delayed promise of which helped spur Pfizer to buy the biotech in 2005 for a whopping $1.9 billion. Anidulafungin had been licensed by Lilly (Lilly again!) to Versicor, one of Vicuron's predecessor companies, in 1999. Pfizer eventually launched anidulafungin in 2006 under the Eraxis brand -- but the acquisition was a bust for the Big Pharma. Eraxis sales in 2008 were microscopic. Dalbavancin, which originated in a unit of Hoechst Marion Roussel and was spun off into Vicuron's other predecessor company, Biosearch Italia, remains disappointingly unapproved.

Domain Associates has made a business out of in-licensing development assets from pharma (usually Japanese companies), creating companies around them, developing the assets further -- and then selling them to Big or Mid-Sized Pharma pre-approval (as it did, for example, with Peninsula, Cabrellis and NovaCardia).

But back to iloperidone, and what a long strange trip its been. In fact two separate pharmas have out-licensed the compound. In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. (Titan, still kicking around and trading as a penny stock, was up an insane 1500% on the approval news.) Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July.

There are a few other ex-Pharma assets coming up to their days of regulatory reckoning before too long. Cadence's Acetavance (from BMS), Movetis's prucalopride (from J&J), and Basilea/J&J's (those lovebirds!) ceftobiprole (originally from Roche) are all before or about to be before FDA and/or EMEA. VCs remain eager to back in-licensing based companies--Versant, for example, is involved in Cadence, Flexion (a POC play modeled on Lilly's Chorus division), and Synosia (CNS assets from Roche and others).

The dearth of Big-Pharma-to-Biotech asset successes may be a reflection of smart moves by pharma pipeline pruners or just the difficulty of drug development no matter a drug's provenance. But with Big Pharmas like Pfizer making for the past couple years an ever-bigger deal about its spin-off and out-partnering activities, nine months on from the iloperidone Not-Approvable, perhaps we're on the brink of something different.

Fanapt may be an outlier, for several reasons. But it may also be a reason for biotechs to be hopeful.

Dodo image from flickr user kevinzim used under a creative commons license

Temple and Comparative Effectiveness Standards Revisited

We told you to pay attention to the case of Vanda Pharmaceuticals.

To read our story, click here.

We haven’t changed our minds on the importance of FDA’s decision to reject the company’s atypical antipsychotic iloperidone and some of the regulatory and policy issues it brings to the fore.

We quoted comments from FDA’s Bob Temple at a July 30 Institute of Medicine meeting on evidence-based medicine. Temple heads up the office which regulates psychopharmacologic drugs and also serves as director of FDA’s Office of Medical Policy.

At the meeting, Temple said this:

“We have taken a couple of steps that I think are interesting. We’ve turned down new antipsychotic drugs because they didn’t seem as effective as the available therapy. I can’t remember if that ever happened before or whether we didn’t have the [courage] but we did. We decided that it wasn’t good if you’re an acute schizophrenic in the middle of an episode to be treated poorly.”

Our story has generated a number of comments, but we thought you’d be most interested in this one from Temple himself, who says we didn’t get it exactly right when analyzing his remarks at the meeting.

“Some of what I said is misinterpreted,” Temple said in an email. “At the IOM, I was explaining what I perceive drug companies to be perceiving and doing, not describing an FDA standard. That is what I was referring to when I said that ‘It’s getting harder to develop the third, fourth, fifth, and sixth member of a class of drugs because when there’s a generic available [within a class], people are inclined to use the cheap one.”

Our mistake. We thought we communicated that but after re-reading our story, it was confusing. Here’s the rest of Temple’s comments in their entirety. When Temple speaks, we always pay attention.

Temple: “Your next sentence said that comparative randomized studies ‘are the best, and maybe only, way to get drugs through FDA.’ That interpretation and conclusion are incorrect, and surprising, as your next sentence seems to recognize the commercial aspect of what I was saying: ‘To get anyone interested in the next member, you almost need to have some sort of advantage.’

It seems apparent that in my statement I was referring to my impression of what companies are doing to have a commercially viable product when there is a generic available for the drug class, and was not referring to any FDA requirement. In most settings, especially for symptomatic treatments, we do not get or ask for comparative data and are perfectly willing to approve a drug that is shown effective.

I did then go on to say that for antipsychotics (not naming a particular drug) we have rejected drugs that seemed clearly inferior to standard treatment because leaving someone with schizophrenia inadequately treated (which can take weeks to recognize) represents a risk. This is not so novel a position. We ask that new antibiotics, new anti-cancer drugs, new drugs intended to save lives or prevent bad outcomes (stroke, heart attack) have effects close to standard treatment for the same reason - importantly decreased effectiveness is not safe. We had not seen examples of anti-psychotic drugs that were markedly less effective than standard therapy; so I’m not sure you can really say that there's a new higher threshold.”

When looking at Vanda’s iloperidone, we still think there’s little room for negotiation on whether the company will have to do a head-to-head study against Risperdal. The company will have to decide whether it’s worth the money—and risk.

DotW: Stress Test

'Tis the week for stress testing. The IN VIVO Blog is pleased to provide readers with a chance to gauge their own inner angst with this simple diagnostic test.

It's rapid, non-invasive, and can be administered in the point-of-care setting (office or home). (And since it's free, we don't even have to address the potential business model difficulties continuing to dog companion diagnostics, especially in the wake of CMS's proposed decision memo not to cover warfarin testing.)

Please scrutinize the picture above, which shows two identical dolphins joyously leaping out of the water. In a closely monitored, highly scientific study, scientists discovered that in spite of the fact that the dolphins are identical, study participants under stress found differences between the two mammals. The results were statistically significant. Moreover, the number of observed differences closely corresponded to an individual's stress levels. Which leads to this obvious question: what, dear, reader, do you see?

(Pfizer, Forest, and Biovail, we interrupt this post to suggest this could be brilliant marketing for Xanax, Lexapro, Celexa, or Ativan.)

This wasn't exactly the stress test Geithner and group administered to the 19 bank holding companies deemed "too big to fail" when the economy began to unwind last fall. (Too bad--think of the cost and time that could have been saved in what ended up being a weeks'-long endeavor for 150 regulatory officials.) Had Geithner done so, however, it's likely 10 of the 19 companies would have reported perceiving some kind of discrepancy, with Bank of America and Wells Fargo seeing cows and Citigroup some dolphin-related species.

In our own industry, Vanda, Roche-Genentech (at what point will Roche drop the hyphen?), and VeroScience all would have passed with flying colors given the FDA's decision to approve their respective drugs Fanapt (iloperidone), Avastin (for glioblastoma), and Cycloset. As we noted yesterday, Vanda was the big winner with FDA doing an abrupt u-turn on its 2008 decision on the atypical antipsychotic. Shares of the company jumped from less than $1 to over $9 in after hours trading and ended the day Thursday at a healthy $7.84.

Dendreon, too, seems to be in clover (or is that dolphins?). Fresh off positive news from Provenge, the cancer vaccine company hauled in $230 million Thursday night, the second largest follow-on stock offering in 2009. Demand for the for now successful Provenge maker is high with institutional investors (many of whom likely cashed out of Genentech and have money to commit to other life science companies). We're just amazed it took Dendreon this long post-data release to do the raise.

As we transition from APORKALYPSE NOW to APORKALYPSE NOT (yet), state and local health officials can take comfort in the fact that the animal on the right is not--and never has been--a pig. So can VaxInnate, which this week came up with a $30 million Series D, with backing from (among others) The Wellcome Trust. Did VaxInnate take advantage of the highly infectious A(H1N1) hysteria to pull in the additional funds? Probably, given the press release highlights the biotech's work on "a prototype swine flu vaccine that could be available for preclinical animal studies in as early as six weeks". CEO Alan Shaw also notes that the additional money--the company has raised more than $90 million in venture capital if you are tracking--will be used "to support the application of our technology platform to vaccines for other infectious diseases, among them HPV, RSV and the emerging swine flu.”

Who in our industry might fail this stress test? Ipsen and Solvay might be reeling given yesterday's announcement that Testim and AndroGel have been slapped with black box warnings and will require risk evaluation mitigation strategies (ah, the dreaded four letter acronym rears its ugly head again). Renovis also comes to mind. This week parent company Evotec announced it was shuttering the South San Francisco biz, probably by mid-August. And of course there's Targeted Genetics, which revealed during its earnings call that bankruptcy could be in its near future if it can't raise more capital by June.

Do you need dolphin goggles? Then it's most certainly time for...

Chiesi/Cornerstone Therapeutics: IVB thinks it will be a whole lot easier to get great Italian food in Cary, North Carolina in the near future. That's because relatively unknown--at least to us insular U.S.-based folks--Parma, Italy-based Chiesi Farmaceutici is buying a 51% stake in Cary-based Cornerstone Therapeutics. (We'll spare you our cheesy jokes.) In exchange for giving up majority ownership, Cornerstone will gain $15.5 million along with U.S. rights to Chiesi's marketed pig-derived lung surfactant Curosurf for 10 years. While cash was an important part of the hybrid licensing deal, it was the access to products that really made the deal of interest to Cornerstone's executives. Indeed, via this transaction, Cornerstone gets the first right of offer on all other Chiesi drugs intended to be commercialized in the U.S., including a synthetic version of surfactant currently in Phase I studies, Nymusa, a drug to treat sleep apnea in newborns which garnered a positive opinion from European regulators recently, and late stage products in asthma and cystic fibrosis. As a result, the deal continues to move Cornerstone in the direction of becoming a respiratory-focused specialty heavyweight. Last year Cornerstone set itself on that path, reverse merging with Critical Therapeutics and gaining access to Zyflo CR for asthma. With Curosurf, Cornerstone becomes a dominant player in the neonatal space, in part because there is no near term competition to rival the compound. Discovery Laboratories certainly hopes its own synthetic surfactant, Surfaxin, will give Curosurf a run for its money, but given the FDA issued the Warrenton, PA-based Discovery its fourth complete response letter tied to Surfaxin near term approval of that product seems like a long-shot. Investors didn't necessarily get Chiesi/Cornerstone's novel deal structure, sending the stock down initially to a low of $5.60 from $7.80 on May 7. (The company's share price subsequently rebounded closing Thursday at $7.25. The deal reflects that at least some in our industry are thinking about new deal structures that go beyond the more straightforward licensing arrangements that have dominated the news flow. Certainly the deal recalls, imperfectly it's true, last year’s arrangement between Infinity and Mundipharma and the Roche/Genentech tie-up of the nineties. Last November, the privately held pharmaceutical group Purdue (of which Mundipharma is the European affiliate) took a sizeable equity position in Infinity, gaining ex-U.S. rights to Infinity's oncology programs in exchange for covering the biotech's R&D expenses. Another similarly modeled deal was the one between Ipsen and Tercica. The former owned a 25% stake as part of their partnership on Somatuline Autogel. Ipsen went on to acquire Tercica in a three-company buying spree last summer. As Ipsen and Roche’s eventual purchases of their smaller partners shows, these deal structures create an unavoidable tension that often results in outright acquisition at some future date. Whether that is Cornerstone’s eventual fate remains to be seen—and likely depends on the company’s abilities to increase Curosurf sales.

AZ/Jubilant: We aren't sure how many times we have to say it, but FIPCOs are so old school. FIPNets are where it's at, baby. Not to go all Vince Vaughn on you but they are "so money" these days. At least that's what companies like Lilly and Merck are hoping given the early stage R&D alliances they've struck in India and China. And now AstraZeneca, which has built an enormous R&D presence of its own in China, is joining the FIPNet party. This week came news that the multinational was teaming up with Jubilant Biosys, the Bangalore-based research arm of Indian pharma company, to develop novel drug candidates in the neuroscience area. Financial details of the transaction were light. But as is typical of these deals, the emphasis will be on "shared risk-reward." AZ is putting up research funding for five years. In exchange, it will own worldwide development and commercialization rights to the compounds the Jubilant group develops. Of course, to further incent Jubilant, the Indian company will get development-based milestones, as well as royalties in what could be a very theoretical future. In the press release, AZ's global discovery EVP Jan Lundberg made all the right noises when it comes to FIPNets. The collaboration "complements out internal activities" and "provides a concrete example of the innovative approaches we are taking to deliver a sustainable discovery pipeline with a lean and agile organization," he said. He even managed to sneak in the "more shots on goal" analogy that is now de rigeur from pharma heads of R&D. (Sadly no reference to skating where the puck is going to be.) We totally understand why AZ would want to strike this kind of deal. Depending on the undisclosed economics, it sounds like yet another way to potentially get innovation on the cheap. We aren't so sure about the shared risk-reward mantra, as it looks to us as if it's pretty one-sided. Yes, Jubilant gets some up-front R&D costs covered, but the real money is still on the come and the company won't even have control of the molecules post preclinical. Which is probably why this kind of deal was done in India. As bad as things are in the US and Europe, biotechs here are trying to engineer better terms if they can. And certainly, Jubilant, which has signed a number of deals in recent months including a J/V with Lilly for drug development services last October, is thinking strategically about validation on the world stage.

ZymoGenetics/Seattle Life Sciences: It’s not exactly a spin-out, but if the nascent biotech Seattle Life Sciences looks like a “cousin” of ZymoGenetics, there’s good reason. In a deal announced May 4, ZymoGenetics transferred eight preclinical programs to SLS for future considerations but no upfront cash, in a deal bird-dogged by the startup’s chief science officer, a former ZymoGenetics executive. Seattle-based ZymoGenetics cut its staff by one-third last month and wants to focus on building up its one approved product Recothrom (topical recombinant thrombin), as well as its partnership with Bristol-Myers Squibb to develop the novel peg-interferon lambda for hepatitis C. In seeding the pipeline of previously unknown SLS, whose Web site is currently under construction, ZymoGenetics hopes to eventually monetize parts of its patent estate that it no longer plans--or can afford?--to develop itself. The eight programs – which could yield drugs for oncology and diabetes – will bring ZymoGenetics unspecified milestones and royalties, plus an equity stake in SLS when the new firm completes its initial funding round. SLS Chief Science Officer Steve Jaspers said his company can more aggressively seek financial backers – likely to be venture capital firms or angel investors – now that it has some assets to build with. In 15 years at ZymoGenetics, starting as a bench scientist and moving his way up, Jaspers said all of the molecules acquired in the deal had crossed his desk in at one time or another. During ZymoGenetics’ first-quarter financial call May 5, CEO Douglas Williams said the asset transfer to SLS was a deal that had been in the works for some time and reflects the company’s decision to end R&D in oncology and focus on “selected immunology programs, which is the core strength of the company.” He added that, “we think this is a great way of unlocking some value in IP estate … [and] take what I characterize as non-performing assets and potentially create the opportunity to generate some value there.”
Under the deal, SLS receives platelet derived growth factors and their antagonists (PDGF-C, PDGF-D, PDGF-C Antagonist, PDGF-D Antagonist), a prokineticin 2 molecule and its antagonist (PROK2 and PROK2 antagonist), human beta defensin 3 (HBD-3) and CTRP-1. Jaspers said that instead of targeting one or two specific therapeutic areas, SLS wants to take a flexible approach and develop the molecules in whatever direction appears most promising. The antagonists all have demonstrated vascular angiogenesis activity in animal models, suggesting they have potential as oncology products, he added. In terms of timelines, Jaspers said which program advances and how soon will largely depend on funding. In addition to seeking equity investors, SLS, currently self-financed with a headcount of five, will explore other options like partnerships with biotechs and pharmas, he said. – Joseph Haas

Biovail/GlaxoSmithKline and Biovail/Acadia: Biovail earns Deals of the Week's twofer award, inking two different but related deals in its attempt to become a neurology powerhouse. On Monday, the company plunked down $30 million upfront for rights to Acadia's Phase III Parkinson's disease psychosis drug pimavanserin. Acadia could reap an additional $160 million in milestone payments, should the new chemical entity be approved for PDP and Alzheimer's disease psychosis. On Biovail's May 6 earnings call, CEO Bill Wells made clear that when it comes to partnering he prefers back-end loaded deals like Acadia. "Wherever possible, we'll limit our upfront payments and structure the aggreement such that additional funds are provided as the product meets certain milestones and presumably the risk profile improves," he told investors and analysts. Maybe the desire for derisked assets explains why the specialty pharma was willing to shell out $510 million to GlaxoSmithKline for U.S. rights to the generic Wellbutrin XL (bupropion). But there's development risk and then there's marketing risk. GSK and Biovail have had a long and complicated partnership concerning this particular anti-depressant; the two first teamed up in 2001 in a product swap deal that gave GSK worldwide marketing rights to Wellbutrin (with Biovail continuing to manufacture and supply the product) in exchange for the topical antiviral Zovirax. Wells tried to make the case on the earnings call that this second deal is all about strengthening the base and increasing cash flow via a product that noone can argue Biovail doesn't know well. "The incremental cost associated with bringing in this product is minimal, practically nil, so almost all of the revenues of this product drop to the bottom line in terms of cash flow. So it's extraordinarily efficient," he told analysts on the call. Still sales of the drug have been hit hard by the introduction of generic versions, slumping 70% last year to $68 million. Thus, it's hard to understand why Wells believes Biovail can expect yearly "incremental cash flows of $80 million to $90 million, growing to $120 million to $130 million in year 2010" for Wellbutrin especially when he made very clear that Biovail is unlikely to spend much effort marketing it. "The product is a genericized product, so there is no sales effort that goes with it," he said. Analysts clearly didn't get the logic of the Wellbutrin deal. GMP Securities analyst Cosme Ordonez called the forecast "difficult to understand". We can see the logic of adding Wellbutrin to an existing basket of goodies, especially given that it would be an easy sales call to make while pushing Aplenzin, a once daily alcohol-resistant form of bupropion that launched in April. Only problem is Biovail partnered U.S. rights to Aplenzin to Sanofi Aventis in December so this deal doesn't give it sales and marketing synergies. Instead it seems to create additional competition, with the renewed success of Wellbutrin potentially stealing market share from Aplenzin or vice versa. But should Biovail be able to generate revenues in the realm it forecasts, its certainly true Wellbutrin will smooth out earnings. Something else that will surely help: drastically cutting the quarterly dividend from 37.5 cents to just 9 cents.

Covidien/VNUS Medical Technologies: Cross off buying a Toddler 2T outfit for Covidien, the soon-to-be two-year-old already bought its own gift. The former Tyco Healthcare company stepped up with an acquisition of publicly traded VNUS Medical Technologies for $440 million. Device watchers--hello self--have been naming Covidien as one of the most likely mid-tier device companies to step up and take the load off Medtronic, which has done the bulk of the buying this year. Covidien, afterall, is an amalgamation of several high profile acquisitions completed over the past decade, so it's no stranger to growing by buying. And it's made some big buys in recent years including deals for Scandius Biomedical, Confluent Surgical and Vivant Medical. But more importantly, Covidien officials have made it clear that they want to grow through both internal and external development. To help with the former, the company established a corporate venture unit to help. But Covidien didn't have to look far or wide for the publicly traded VNUS. The San Jose-based company makes products that treat vericose veins and venous reflux disease, which can cause swollen veins and discoloring of the skin. Covidien will roll the VNUS Closure device into its growing vascular business (which is still digesting the purchase of Covidien's quiet acquisition of venture-backed Bacchus Vascular completed in March.) With VNUS, Covidien didn't stint, paying VNUS at $29-per-share, a 36% premium to the Thursday closing price. Covidien expects the deal to be completed by June 30, one day after Covidien celebrates the second anniversary of its split with the once troubled Tyco. Count us as relieved. We already gave Covidien the gift of an IN VIVO profile last year. We weren't quite sure how we could top that one.--Tom Salemi

(The In Vivo Blog would like to reassure readers that no dolphins--or cows--were harmed in the writing of this post. Many thanks to flickr user tidewatermuse who provided the image under a creative commons license.)

DotW: From Russia With Love

It's the end of an era--or maybe just the end of the beginning. This week saw the WYE ticker officially disappear, as behemoth (Pfizer) gobbled up the merely big (Wyeth). Two small firms--La Jolla Pharmaceuticals and VaxGen--also entered Biotech's Bermuda Triangle to the surprise of few.

It also appears to be the end of the beginning for the "FIPNet" strategy as the industry continues to pursue the "virtual is the new reality" approach to drug discovery. Thus, Big Pharma's focus these days is on externalization, especially the ability to sign partnerships that put the onus on the ally. In exchange for taking on a greater proportion of both the risk and cost of development, a smaller partner gets the chance to take a bigger chunk of the downstream economic reward if said research pans out.

Nowhere has the strategy been more evident than in Asia, where Big Pharma hopes to tap into the increasingly high quality research available in India and China--countries that also should prove to be a major source of future customers. Merck and Lilly in particular have been active, signing deals with Advinus (Merck), Glenmark (Lilly), Nicholas Piramal (both), and Hutchison MediPharma (Lilly). (Speaking of Asia, don't forget about our PharmAsia Summit in a couple weeks ... )

Now the FIPNet action--or something similar, anyway--is moving to another closely watched emerging market: Russia. This week Roche announced an interesting licensing deal with Viriom, a Russian biotech founded earlier this year. As it turns out, Viriom was formed specifically to develop and commercialize (in Russia, Ukraine, Belarus and Kazakhstan) Roche's pre-clinical non-nucleoside inhibitors of reverse transcriptase (NNRTI) for the treatment of HIV/AIDS--although it's free to develop and license other targeted medicines in HIV too.

We're not quite talking Roche's FIPNet initiation here, mind you; "we don't believe this is the same kind of deal," asserts Roche Pharma Partnering's Peter Sandbach; "the intention was not a risk-sharing one." Roche didn't intend to develop the compounds internally--so it's more about leveraging de-prioritized assets than pulling in partner to share development risk--although granted, the Swiss pharma will be allowed to use Viriom-generated clinical data for its own use and retains rights in all other territories. Viriom will pay Roche royalties on sales of any resulting treatments in its territories.

For the Russian start-up, this deal brings close involvement of an experienced HIV drug developer, given that Roche personnel will participate on Viriom's board. Indeed, Roche reckons this deal is a first for Russian biotech, given that Viriom will take the assets all the way to market.

For Roche--which isn't paying a dime--the deal provides a useful catalyst for building up a presence in a growing market. It provides the Swiss group with a nice 'in' with the Russian government, keen to create home-grown 'bioclusters' and to encourage innovation. "The compounds licensed to Viriom will help to create a Russian BioCluster/Incubator," noted Tuygan Goeker, Roche's regional head of Central & Eastern Europe, the Middle East, Africa, and the Indian sub-continent in the PR.

It wasn't all Ruskies and FIPNets all the time, of course. There was progress on the health care reform front, the DOW hit 10,000 and deal-makers shook (not stirred) things up, just in time for us to decode them with our special LEKTOR device.



Onyx/Proteolix: In an attempt to fill a mid-stage pipeline gap, Nexavar maker Onyx announced Oct. 12 plans to acquire privately-held Proteolix for $276 million in upfront payments and another $585 million in milestones. The deals give Onyx a promising Phase II multiple myeloma medicine, carflizomib, which has been billed as a next-generation version of Takeda/Millennium's first-in-class proteasome inhibitor, Velcade. The acquisition positions Onyx to expand into the global $16 billion hematological cancer market with a potential blockbuster--if carflizomib proves more effective than Velcade, which last year raked in over $1 billion. (Carflizomib is touted as being more specific, so troubling off-target effects, especially neurotoxicity, should be limited.) The deal structure is heavily weighted towards milestones, with most on Wall Street favoring the tie-up. VCs are likely happy too--it is an exit, albeit not one of the richest ones we've seen in the industry. Since its founding in 2003, Proteolix has pulled in more than $125 million in financing, including a whopping Series C of $79 million last July. That means the return on the upfront money is only a little over 2x for Proteolix's investors, which include Delphi Ventures, Nomura Phase4 Ventures, and Advanced Technology Ventures. Of course, if carflizomib is a major success and the earn-outs are realized (and you know where we stand on the odds of this happening), that return will jump to around 7x, which sounds a whole lot more venture-like.--EFL

Novartis/Heptares: Another week, another Novartis Option Fund deal. This time, the investment, a $30 million Series A in Heptares, a UK biotech that specializes in stabilizing GPCRs so they can be poked and prodded after being removed from the cell membrane, was announced months ago. NOF, Clarus Ventures and MVM Life Science Partners invested equally in the round. Why the delay on the option component of the deal (which we should note again is distinct from Novartis' venture investment)? The companies simply took their time deciding which GPCR target to work on, Heptares CEO Malcolm Weir told IN VIVO Blog. And after lots of discussions with various therapeutic area groups at Novartis, Heptares is now getting to work, "starting from scratch on a GPCR we wouldn't have otherwise been working on," he said, though details of the target are thus far kept under wraps. The deal, with undisclosed upfront payments and milestones that could reach $200 million before royalties, sees Heptares driving drug discovery programs around the target and follows Novartis' stated M.O., avoiding Heptares' key assets in favor of a less-advanced program. For more info on Heptares check out this Start-Up profile of the company from earlier this year.--Chris Morrison

GlaxoSmithKline/Prosensa: In another sure sign of Big Pharma's recent embrace of specialist diseases, GlaxoSmithKline announced a four-compound deal this week with Holland's Prosensa, which is focused on RNA-modulating therapeutics for Duchenne Muscular Dystrophy. The deal hinges on a straightforward license component--Glaxo takes an exclusive worldwide license to lead compound PRO051, in exchange for a £16 million up-front payment. And far more typical for Glaxo, the drug maker also gets exclusive options to license three further RNA-based compounds. The total development and commercial milestones across all four candidates could reach £412 million, and Prosensa may also receive double-digit royalties. It isn't completely fair to call drugs for DMD specialist. They're actually ultra-specialist. PRO051, for instance, is designed to treat just 13% of the DMD population--a small proportion of an already highly niche disease. Indeed, the small market size was just one reason Prosensa's CEO Hans Schikan told "The Pink Sheet" DAILY, he didn't "in the beginning, honestly expect GSK to be interested" in the programs. But apparently niche is the new blockbuster (especially when meeting high unmet medical need practically guarantees reimbursement from payers). Schikan confirmed that GSK wasn't the only company sniffing around Prosensa's platform.--Melanie Senior

Novartis/Vanda: Vanda Pharmaceuticals' unlikely success with its once-maligned antipsychotic iloperidone continues. This week the biotech sold back US and Canadian development/commercialization rights to its newly approved lead asset to one-time owners Novartis, for $200 million up-front, plus milestones and royalties. Our full take on the deal is here.--CM


Wyeth/Progenics: Big Pharma mergers don't just create disarray for the integrating parties; they can be very stressful for smaller biotech partners, especially if their assets aren't central to the newly merged company's strategic endeavors. Thus, one of the hallmarks of mega-mergers is the unwinding of smaller deals. Just one day before Wyeth officially became part of Pfizer, it announced it was paying $10 million for Progenics to take back all development and commercialization rights to its opioid-induced constipation medicine Relistor. The two companies originally teamed up in 2005 in a deal that gave Progenics $60 million up-front, plus the potential to earn another $356.5 million in downstream milestones and royalties. But the injectable medicine, approved by the FDA in 2008, hasn't been a big earner--it garnered just $3.2 million in global net sales in the second quarter of '09. Although revenue was increasing substantially--up 74% from the first quarter--it seems Wyeth wanted to shed a low-earning asset prior to the Pfizer merger. And Progenics wasn't complaining. "Progenics has become increasingly aware that our objective of advancing the Relistor franchise was not aligned with the near-term priority of integrating these two large pharmaceutical organizations," Progenics CEO Paul Maddon said during an Oct. 14 investor call. The revised agreement leaves Progenics free to partner the medicine outside of Japan, where Ono Pharmaceutical locked up rights in 2008 for $15 million. In addition to the $10 million, Wyeth will also continue to provide manufacturing, marketing, and sales support for Relistor during a 12-to-15 month transition period, and will fund completion of an ongoing 1,000-patient Phase III safety study for the drug in chronic pain.--EFL

DotW: (Dis)contented

Now is the winter of our discontent. Apologies to both Shakespeare and Steinbeck, but it does seem as though we've all morphed into either Richard the Third or Ethan Allen Hawley. Moreoever, if the market reaction to Obama's housing plan is any guide, he's unlikely to prove the son of York destined to bring us a glorious summer.

As the Dow slid more than 100 points again Friday--down 6% for the week--to 7365.67, the tweets, twitters, and chirps tracking our economic outlook grow more downbeat. According to BNET, pharma cos have only begun to experiment with the new medium--hey, we can't really crow; we just started cheeping--or is that cawing?--yesterday.

News this week suggests at-risk companies in our sector now include Curagen, Vanda, and--here's a surprise--La Jolla Pharmaceuticals, all of which are looking at strategic options.

Even as Genentech continues to fight off Roche's hostile offer, the biotech was forced to acknowledge additional cases of PML associated with Raptiva. The news is unlikely to dampen Roche's desire for Genentech, and Raptiva has never been the central focus for institutional investors. Avastin anyone? But the news does bolster Roche's argument that $112-a-share for the storied South San Francisco outfit might be a wee bit generous. (Meanwhile the Swiss Pharma announced the sale of $16 billion in bonds, indicating it is lining up its financing to proceed with the deal.)

And Astellas can't be feeling too good. Remember how CV Therapeutics told the company to "hit the road jack", then thought better of it, and decided to look at the Japanese pharma's nearly $1 billion acquisition offer? On Feb 20, the Palo Alto, CA-based CVT came back with an official "don't you come back no more". As Astellas mulls its next move, here's one option not on the table: appeaing to CVT's shareholders directly. A standstill agreement included in the licensing agreement Astellas's predecessor Fujisawa inked with CVT means the pharma' can't take such aggressive action.

Traditional venture capital groups continue to wring their hands over "the denominator problem", capital calls, and the need for a plan B. Meantime corporate venture continues to shine, getting in on such deals as this week's Opsana Therapeutics and Genocea Biosciences financings.

If your feeling disgruntled or simply want an excuse to bone up on random literary and pop culture allusions, IVB is here with another edition of...

Medtronic/Ventor: With economic pressures creeping into the medical device market, stalwart competitors with suitable cash reserves are looking to turn economic woes into opportunity, seeking out potential acquisitions in areas that offer the best bang for the buck. Among the handful of segments that fall into this category, transcatheter heart valve replacement and repair, although at a relatively early stage in its evolution, is one that has garnered a great deal of interest. All of the big names in cardiovascular devices—including Edwards Lifesciences, Medtronic , Boston Scientific, Cordis/Johnson & Johnson, and St. Jude Medical--are either participating in this market or have expressed an interest in doing so, either via internal development work or partnering/acquisition. For the two dozen or so privately held emerging competitors working in this arena, the hope is that this interest will eventually translate into an M&A offer with a hefty price tag. For the Israeli company, Ventor Technologies, those hopes may soon become reality. According to recent media reports, Medtronic is close to completing a deal to acquire that privately held start-up for $325 million. Ventor, which is developing a transcatheter aortic valve replacement technology, launched a first-in-human (FIH) trial of its first-generation Embracer device in 2008 and expects to begin a pivotal, multicenter study later this year. Results of the initial FIH study were presented at the 2008 Transcatheter Cardiovascular Therapeutics (TCT) meeting, held last October in Washington DC. Medtronic and Ventor are well known to one another. As one of the firm’s investors, Medtronic reportedly contributed $7.5 million to Ventor’s latest funding round, a private placement completed last May. Since its founding in 2004, Ventor has raised a total of about $20 million, so a $300+ million exit would be an extremely successful outcome by any measure. For Medtronic, the acquisition will serve to help beef up the company’s cardiovascular pipeline and focus the firm more solidly on future high-growth market opportunities. Medtronic’s cardiovascular business has lately been facing competitive pressures in several of its key product lines. The company’s Endeavor cardiac drug-eluting stent (DES) is facing an uphill battle now that it must compete with Abbott Laboratories’ well-regarded Xience V DES (also sold under a private label as Promus by Boston Scientific), which quickly catapulted to a market leading position in the US after its launch last July. Moreover, Medtronic’s implantable cardioverter defibrillator (ICD) business has lost market share in recent quarters (although the firm now says the situation has stabilized), due in large part to lingering effects from the company’s Sprint Fidelis lead recall last year, which gave a boost to ICD competitors Boston Scientific and St. Jude Medical.--Mary Thompson

GPC Biotech/Agennix: This week GPC Biotech—on its knees since prostate cancer candidate satraplatin got knocked down at FDA in late 2007--announced plans to merge with a cash-strapped US counterpart, Agennix. GPC brings money, some people, clinical development experience and a public listing; Agennix brings a Phase III cancer compound, talactoferrin. Dievini Hopp BioTech holding, the investment company of German billionnaire Dietmar Hopp (co-founder of the multinational business software company SAP AG), provides the newco with a crucial cash infusion of €15 million. Thanks to the satraplatin debacle, it's long been expected that GPC would ink some kind of deal. But as we wrote in this blog post, IVB doubts this tie-up is the kind of sale GPC Biotech's CEO Seizinger had in mind. It’s essentially a reverse merger: GPC Biotech will be tipped into a new—as yet unnamed—company, which will also hold all of Agennix’s shares, plus the €15 million cash contribution. GPC’s shareholders will own 39.3% of the new group, Agennix’s 48%, with the Hopp cash representing 12.7%. As one of GPC's largest shareholders--the protagonist of GPC’s February 2006 fundraising, among others--Hopp is calling the shots. That's one reason the newco will be listed on the Frankfurt Stock Exchange not the Nasdaq; GPC is de-listing from that exchange as part of the merger. Top priority for the newco? Development of Agennix's talactoferrin, a recombinant version of human lactoferrin that is delivered orally. Phase II studies of the drug showed compelling results in NSCLC, according to Agennix. By bolting talactoferrin onto GPC's own products, which include a Phase I kinase inhibitor and satraplatin (which still hasn't quite drawn its last breath), the aim is to create a viable pipeline that can be advanced by GPC's biz dev team. Thankfully, the newco has enough cash, courtesy of the Hopps, to last until mid-2010.

Romark/Chugai: Details were decidely lacking when it came to this week's tie-up between privately held Romark Laboratories and Chugai for the Japan-centered development and commercialization of Romark's Phase II hepatitis C compound, nitazoxanide. As part of the deal, Romarks gets an undisclosed upfront payment from Chugai, and stands to receive additional (undisclosed) monies based on certain clinical and regulatory milestones. According to a press release anouncing the news, Romark will also receive (you guessed it, undisclosed) profits from product sales in Japan through a supply agreement, as well as royalties. "Chugai is an excellent partner for us in Japan. They bring substantial expertise in the development and marketing of treatments for chronic hepatitis C exemplified by their experience with Pegasys and Copegus," said Jean-Francois Rossignol, Chairman and CSO of Romark (Whew. I'm glad he disclosed that.) Japan, is of course, a notoriously difficult market to break into. Current wisdom is that effective commercialization of drugs in that country is often best left to Japanese pharmas who better understand the unique regulatory and sales hurdles of the home market. (It's one of the reasons for Affymax's 2006 deal with Takeda for Hematide or Amgen's 2008 monster deal--also with Takeda--involving 13 products.) Moreover, such deals provide US or European based companies with important non-dilutive funding, while doing little to dimish the partnering potential deal for a product in the rest of the world. Back in 2004, Vertex licensed Mitsubishi Japan-only rights to telapravir, receiving $33 million for that particular Phase I product. Could Chugai, part of Roche's hub and spoke model, be paying as dearly for nitazoxanide? It's hard to say (I know, that's never stopped us before.) On the one hand, the drug, which belongs to a new class of broad spectrum antiviral drugs known as thiazolides, has largely been derisked in terms of its side-effects, a sticking point that's buried many a promising hepatitis C drug in the past. Romark already markets the compound as an anti-diarrheal called Alinia. But it's also true that nitazoxanide has a storied past. Romark first licensed the compound to UniMed Pharma back in 1995 in a deal worth about $1 million. Three years later, it repurchased rights to the product after UniMed abandoned development citing changed strategic interests. In addition to hepatitis C, the drug is also being studied as a possible therapy to treat rotavirus and Crohn's disease.

Lilly/NeuroSearch: We aren't sure if NeuroSearch qualifies as the little engine that could or the little engine that can't--recall that earlier this month the Danish firm stopped work on its experimental medicine ABT-894 after a Phase II trial blow-up. Either way, the Danish company keeps doing deals. Who knows? One of these days they'll score. It not clear whether the most recent deal--a collaboration with Eli Lilly on new CNS therapeutics announced Feb. 17--will be the one that scores the big payola. The company's expanded collaboration with GSK announced late January is also in the running for that honor. And like the GSK deal, the tie-up with Lilly is one where NeuroSearch's rewards are primarily all on the come. The three-year drug discovery and development deal calls for NeuroSearch to investigate a defined number of ion channel modulators as potential CNS treatments--specific details concerning the targets were, of course, undisclosed. But IVB does know that NeuroSearch is gaining $5 million up-front for its efforts, plus up to $8 million more in funding and research fees. Lilly has also agreed to take a $17 million equity stake in the company. The deal is structured so that NeuroSearch bears the brunt of the responsibility and cost for the early work, with Lilly having "various options to exercise license rights to individual compounds". Should it exercise the option to a compound, Lilly is responsible for the remaining development and commercialization costs associated with the molecule and will pay NeuroSearch milestone payments per product of up to $320 million plus royalties. covered by the agreement and related intellectual property. For Lilly, the deal is yet another example of how the company hopes to access innovation via external collaborations through its FIPNet strategy, which the company's been discussing now for a few years as a possible means to solving its pipeline gap.

Shire/UCB: Shire is to acquire worldwide rights (ex-US, Canada, and Barbados -- hey, it's a critical market; think how manic your vacation might be otherwise) from UCB to Equasym IR and Equasym XL for treating Attention Deficit Hyperactivity Disorder. The deal hasn’t exactly made a dent in the $1.2 billion cash that Shire generated last year—it will pay just €55 million in cash, which is just over three times the products’ 2008 net sales, plus undisclosed milestones if it meets certain pre-defined sales targets. So it’s a tiny deal, but also a tidy one: UCB divests drugs (and 20 sales personnel) in markets that aren’t core, furthering its focus on "bringing new innovative medicines to people living with severe neurological conditions,” according to Troy Cox, President CNS operations for UCB. (And indeed, the Equasym drugs –which are immediate release and extended release methylphenidate hydrochloride—aren’t innovative, and ADHD doesn’t really classify as a severe neurological condition. That said, UCB’s hanging on to the US market, where the drug is sold as Metadate CD and competes with Ritalin.) But for Shire, the products fit right in. The group is already a leader in the US ADHD market, with sales of almost $1.5 billion last year. Equasym not only fills out the armamentarium, but provides a bridge into Europe, where Shire doesn’t currently sell any ADHD drugs, helping prepare for the European launch, planned for 2011, of long-acting Vyvanse. (Vyvanse, recently approved in the US, is where Shire hopes to transfer most of its Adderall XR patients ahead of generics in April.) And although most of Equasym sales are currently in Europe, buying worldwide ex-US rights provides Shire with a cheap, established treatment that may be more suited to some developing markets. That helps, albeit in a small way, further another of Shire’s goals: to quadruple the share of sales it generates from RoW to 25% by 2015--Melanie Senior.

Image courtesy of flickr user HOBO through a creative commons license.