Wednesday, November 29, 2006

Pfizer UK Gets “Closer to Customers”

“Increased patient safety” drove Pfizer’s recent deal with UK wholesaler Alliance UniChem, according to the partners. But no one’s buying the story.

Following a tender process allegedly involving all UK wholesalers, Pfizer earlier this Fall chose UniChem as its sole distribution partner in the UK. The move, says Pfizer, will reduce the number of counterfeit drugs getting into the system—including those from parallel trade—and ensure ease of supply and simplified logistics.

Critics claim that patient access is put at risk by reliance on a single supplier for such a wide portfolio of drugs. Perhaps. But that’s not the biggest concern—Alliance is one of the biggest distributors, and it’s not likely to mess around where its largest and most lucrative customer is concerned. Which brings us to the next problem: the deal smells highly anti-competitive. Alliance promises to “maintain excellent service all around,” but the Office of Fair Trading isn’t convinced. Nor are 33 Members of Parliament who have signed a motion opposing the deal.

Pfizer has gotten into deeper political waters than it might have liked. The Big Pharma's UK division has written to MPs defending the deal.

Trouble is, this tie-up is more than about two partners getting extra-friendly. It introduces an entirely new model to UK drug distribution—a model that is clearly about price and market share. From March 2007, Pfizer will deal directly with customers—pharmacists—on cash discounts for its products, with UniChem acting only as a “logistics service provider” (its own words).

So Pfizer ekes out better deals across its entire range by cutting out the middleman and leveraging the breadth of its offering to compel pharmacists to choose its products over its rivals---take our statin and we’ll discount the nasal sprays---and UniChem, in exchange for its cut on the cash discount, accesses a bunch of new customers that want—need—to keep buying Pfizer’s drugs.

It’s all about patient safety.

Monday, November 20, 2006

You Are Feeling Very Sleepy

Today Somaxon announced more positive results for its Phase III insomnia drug low-dose doxepin (Silenor). This trial--a test of the drug in elderly patients with primary sleep maintenance insomnia (trouble staying asleep) was the third Silenor Phase III to read out and added more positive data to boost Somaxon's prospects. The results of the final Phase III for Silenor should be released in December.

Insomnia is a massive market and one that remains responsive to old-school boots-on-the-ground promotion and DTC-driven consumer awareness. Market growth has been largely fueld by Sanofi-Aventis' controlled-release zolpidem (Ambien) and to a lesser extent to Takeda's rozerem (Ramelton) and Sepracor's eszopiclone (Lunesta).

But it's also a space where Big Pharma thinks there's room for improvement--and isn't afraid to spend for a shot at the market. Pfizer bought into Neurocrine's indiplon in 2002 and the drug was widely expected to give Ambien a run for its money--but Pfizer wound up giving up on indiplon when the FDA raised questions about its higher, extended-release doses that basically sidelined the drug.

Somaxon hopes that Silenor can provide physicians and patients with the best of both worlds: GABA acting drugs like Ambien, Lunesta and indiplon are the most effective drugs on the market--but are so-called Schedule IV controlled substances according to the DEA, and thus are potentially addictive. Rozerem is not scheduled, but so far such melatonin agonists have not shown the same efficacy as GABA acting drugs.

If Silenor, an H1 receptor antagonist (and available as a generic antidepressant at higher doses), can demonstrate GABA-like efficacy and steer clear of DEA scheduling Big Pharma partners should be very receptive.

Wednesday, November 15, 2006

Illumina Buys Solexa

Tool companies are popular among life-science VCs for their simplicity of exit: build a start-up around a truly novel technology, one of the existing major players will have to buy out the company before one of its competitors does. Thus, there are few worries about having to commercialize technology: far more important to develop it well.

That's essentially the story of Solexa, which sold out to Illumina for $600 million in stock. The only twist is that it sold to Illumina--one of the rare new-ish companies which has been able to make a big splash in the research market and thus provide another bidder, along with the more established companies like Applied Bio, Invitrogen, and Amersham. Look for Solexa's rival, Helicos, to go next. The Solexa deal is also very good news for both SV Life Sciences and Oxford Biosciences, representing the second recent major exit for each firm.

The news was especially welcome for Oxford, which had struggled to raise its current fund based on their equivocal track record from their more recent funds, which had -- building on Oxford's history -- focused on discovery opportunities. But when Oxford was making its investments, discovery was decidedly out of favor in the pharmaceutical industry. It seems to be coming back, however.

First Merck bought Sirna for $1.1 billion--a company with no real therapeutic proof-of-principle to its RNAi programs. And now Illumina has more than justified Oxford's investment in Solexa.

One should note as well that this is Oxford's second exit involving a public company: Solexa had reverse-merged into the failing public-company Lynx in 2004, both for its US listing and its technology. Sirna had been a failing public company, called Ribozyme, when Oxford, Venrock and several other firms invested in it.

Friday, November 10, 2006

When a partner becomes too expensive

What do Abgenix, Icos and Tanox have in common?

Just as Eli Lilly decided it was better off buying Icos for the biotech's share of Cialis upside and Amgen acquired Abgenix to secure 100% of potential panitumumab revenue, Genentech--not exactly a serial acquirer of any kind--did the math and figured it was time to take out Tanox, with whom it has been involved in a three-way partnership (along with Novartis) for more than a decade. The biotech giant will pay $20/share in cash for Tanox, a 47% premium to the stock's previous close, or a total of $919 million.

The companies' omalizumab (Xolair) is an anti-IgE monoclonal antibody that downregulates the allergic response in patients with moderate-to-severe allergic asthma. Genentech can now breathe a bit easier--it eliminates the Tanox royalty and will now receive the cash from Tanox's royalty and profit sharing arrangement with Novartis. Tanox's pipeline is gravy.

US Xolair sales surpassed $300MM in 2005, it's second full year on the market.

Wednesday, November 01, 2006

Pfizer and torcetrapib

The news that torcetrapib, Pfizer's HDL-increasing CETP drug, slightly increases blood pressure is highly problematic for the world's largest pharmaceutical company. Torcetrapib was supposed to compensate for a string of patent expirations in the next few years (Zoloft, Zyrtec, Norvasc and Aricept – and Lipitor in 2011). But it is also extremely bad news for other companies developing CETP drugs -- particularly Roche. Several questions: what are the regulatory hurdles posed today by this kind of problem? Are the traditional lipid targets overplayed--and should companies be focusing on the less obvious targets in atherosclerosis, like inflammation or vulnerable plaque?