Monday, June 30, 2008

Sometimes the Bear Gets You: Myriad/Lundbeck Edition

As far as $100 million bets go, this one went south pretty quickly. Only five weeks ago Lundbeck licensed European rights to Myriad Genetics' Phase III Alzheimer's candidate Flurizan, knowing that what cost $100 million upfront in May would cost much more in July should a results of an 18-month Phase III trial of the drug turn out positive. The drug missed each of its primary endpoints, Myriad said in a short statement early this morning. Development of the drug has been discontinued.

For Lundbeck a big part of the backstop to its Lexapro/Cipralex depression franchise, due to go off patent 2012-14, is now gone. Lundbeck shares are off 10% in morning trading. And once markets open in the US, Myriad is likely to lose a big chunk of its own $2 billion market capitalization.

At the time of the deal we thought that Lundbeck's endorsement of what was seen as a risky project reflected a better chance of success--perhaps in hindsight it was just desperation.

While You Were Beating Up on Germany

Congratulations to our Spanish readers, whose national side deservedly defeated Germany yesterday 1-0 in the Euro 2008 final. The victory was Spain's first in a major tournament in 44 years, which basically makes them the Philadelphia of Europe. Except for, you know, the winning.

In industryland this morning the WSJ asks on Page One whether Vioxx and other recent high-profile drug safety issues has fundamentally altered the path of drug regulation in the US. Industry executives certainly think so--Schering Plough's Fred Hassan is front and center in the article, talking about how FDA's paradigm shift has caused him to take a harder look at the company's drug candidate portfolio. FDA's Janet Woodcock is on the scene to dutifully make the counterargument.

Any of this sound familiar? By now the woeful approval totals of 2007 are old news. And if as the article suggests (and as we agree) there is plenty of blame to go around (much of it for industry for "for allegedly manipulating clinical data, concealing dangerous side effects and aggressively promoting risky products, which created widespread mistrust"), there should be, and are, plenty of pharma rethinking their pipeline strategies.

Where the article doesn't go--and this may point to a lack of ideas or transparency about those ideas on Pharma's part--is just how the industry can address both it's own lack of productivity and a difficult regulatory climate.

A few other tidbits to get you caught up from a sunny weekend, below:
  • To CT or not CT? That is the question the NY Times asks in this piece that details the increasing use of expensive CT angiograms, and uses the procedure to illustrate the trend in the US that sees patients and doctors utilizing expensive new technologies and procedures without concrete proof that novelty necessarily leads to better outcomes.
  • Not this weekend, darling, I've got a headache (meeting): The American Headache Society met in Boston over the past few days. Get yer migraine news here.
  • Plenty of complaining and hand wringing in the UK about the state of their local market, access to new drugs, and the climate for building drug companies this past week. But the Guardian reports that the NHS may be about to circumvent NICE to grant access to approved therapies before the pharmaco-economics body has its say, which will surely be a welcome respite for drug companies.
  • The long, strange trip of the latest cure for murine cancer is detailed by Reuters, here. Researchers (led by the late Judah Folkman) writing in Nature Biotechnology describe the fungal origins and nanotechnology improvements to the orally available angiogenesis inhibitor lodamin, now licensed by SynDevRx and poised to enter clinical trials in 2009.
  • And finally ... everything you always wanted to know about vasectomy.

image from flickr user Begoña Valverde used under a creative commons license

Friday, June 27, 2008

DotW: Tea Leaves

Bad news on Wall Street this week as the Dow Jones industrial average lost more than 250 points on Thursday and consumer confidence waned. Rising gas and food prices--and the incessant stagflation drumbeat--have prompted a certain proclivity for prognostication stateside. The IN VIVO Blog takes time out to read the industry's tea leaves in this edition of Deals of the Week.

The IN VIVO Blog learned of a major departure this week: Abbie Celniker, head of Novartis's recently launched Biologics division, has left for parts unknown. We aren't really sure what her departure means for Novartis, which announced a major reorganization last October, including the promotion of former Heinz exec Joe Jimenez to run the pharma's drug unit.

News of another major departure surfaced Thursday: David Mott, MedImmune's wunderkind CEO, will be leaving the AZ subsidiary at the end of July for "personal reasons" -- which undoubtedly include too many hours spent burning the candle at both ends within the much more bureaucratic environment of Big Pharma, all the while sitting on a ton of acquisition-related personal cash. And as the clock ran out on what was likely a one-year employment agreement, it's almost certain Mott heard a continuous stream of interesting new investment and management opportunities.

Mott, of course, isn't the only MedImmune executive to announce an exit. CSO Jim Young has also left the company--apparently for a familial and culinary year in France. We suspect biz dev and MediVentures boss Ed Mathers is also considering the next stage of his professional life.

Wholly-owned standalones, à la MedImmune, Sirtris and Millennium, have become common these days as pharmas attempt to transform their business models by purchasing innovative biotechs and ring-fencing them. Mott's departure is almost certain to provoke discussion about the practicalities of the strategy versus, say, Roche's riskier but certainly successful experience with its majority-owned, independently traded Genentech affiliate.

And that, in turn, could promote additional discussion about the need for a diversified business model, particularly as it relates to generics, championed by Novartis and Daiichi and eschewed by Takeda and BMS. Pharmalot's Ed Silverman wonders if J&J is mulling a possible move into generics based on this Wharton interview with CEO William Weldon. Asked about the recent Daiichi/Ranbaxy wedding, Weldon gave this response:

There is a big opportunity in the generic field because of large products going off patent... Each company has its own choices that it has to make. Personally, I think that if you have good research, if you understand the needs of patients and if you can deliver good products into the market, that is the most important thing to be doing and that is where we've committed ourselves so far. But that is not to say that we wouldn't go into generics or other companies. I think that there is a big market emerging and big opportunities in the future.

Meantime, at a forum led by the Institute of Medicine earlier in the week, another approach to drug development emerged, one that Genzyme and Shire (among others)have championed: the orphan drug as blockbuster. For more, check out this post from our own Mike McCaughan. The sludge at the bottom of this blogger's mug is particularly muddy. That means it must be time for...

Genzyme/Isis: Ah, the topsy-turvy ride that is mipomersen. A quick recap: back in January, Genzyme and Isis inked the $325 million up-front alliance on the cholesterol candidate, only to get backfooted by the kerfuffle surrounding Merck and Schering-Plough's Vytorin study, Enhance, shortly thereafter. As we predicted, the regulatory storm in the wake of Enhance (which we've covered extensively--see here) rocked the boat for Genzyme and Isis, which hadn't yet finalized the terms of the mipomersen deal. The companies said in late April that the drug's development timeframe would be reworked in response to an FDA request for more data. For the narrow indication of homozygous familial hypercholesterolemia, that means about a one year delay in filing, from 2009 to 2010. For broader indications including heterozygous FH, a cardiovascular outcomes study will be necessary. So where did that leave Isis and it's truckload of up-front cash and zillions in milestone payments? It took until this week to find out, but the upshot wasn't too bad for the antisense specialist, all things considered. Isis will contribute an additional $50 million to mipomersen's development, reflecting the added cost of the necessary expanded clinical program, and will be eligible for accelerated milestone payments potentially worth $75 million (related to commercial milestones associated with US sales under the heterozygous indication).

Stiefel/Barrier: On Monday came news that privately owned dermatology player Stiefel Laboratories bought all outstanding shares of Barrier Therapeutics for $148 million, or $4.15 a share. The deal price represents a 57.6% premium over Barrier's closing share price on Friday June 20 of $1.76. Stiefel, which makes a variety of over-the counter and prescription medicines, likely saw Barrier as a solid way into the pediatric realm. Two of Barrier's major products include Vusion, an ointment designed to heal pesky diaper rash combined with a yeast infection, and Xolegel, which treats a flaky skin condition called seborrheic dermatitis. Certainly, Stiefel acted opportunistically. As we wrote in this START-UP article, Barrier is one of a number of newly public companies in financial trouble. With less than one year of operating cash remaining, it has seen its share price tumble--back in April, Barrier's stock price was down nearly 78% from its 2004 IPO and in the ensuiing weeks slid even further. Susquehanna Financial analyst Angela Maria Larson told Forbes the deal was "a solid, good offer" but that's likely to be cold comfort to Barrier's VC backers, which include New Leaf Ventures, MPM BioVentures, and TL Ventures. But at least as it pertains to Barrier, these VCs are no longer marooned in the public market.

Novo/Emisphere: As we’ve written elsewhere, Emisphere has had a tough 20 years or so, failing to deliver (no pun intended) on a variety of drug-delivery projects, most spectacularly oral insulin (didn’t work any better than placebo). Now, a little more than a year into the tenure of CEO Michael Novinski, Emisphere has moved from oral insulin, for which needle-less delivery was relatively unimportant, to drugs for which injection is a problem: GLP-1 analogs. To auslanders like us, the different GLP-1’s don’t seem all that clinically differentiated. But Novo’s still unapproved once-a-day liraglutide looks like it will have a delivery advantage over Amylin/Lilly’s marketed twice-a-day Byetta – until, that is, the partners launch once-weekly Byetta LAR. At that point, liraglutide will need extra help – like an oral version. Having worked with Emisphere for at least a year on preclinical studies (with interest significantly heightened by nicely positive clinical studies with Emisphere-designed oral GLP-1), Novo was willing to experiment, modestly. It’s paying a guaranteed $10 million in the first year (modest good news relative to the world of NME drugs, but great for the smaller drug-delivery players like Emisphere – this is its biggest 1st year payment) and, potentially, another $77 million or more in clinical and sales milestones. Emisphere’s stock was, naturally, up on the news – but hardly into champagne territory. The company’s long record of unfulfilled promises is going to keep a lid on the share price until a pivotal trial proves the skeptics wrong.

WuXi PharmaTech/Covance: Although details of the deal still need to be finalized, WuXi and Covance are set to create a 50/50 JV to provide preclinical testing services in China. Covance will contribute $30 million to the project, while WuXi will provide a 323,450 square-foot facility in Suzhou, China. This state-of-the-art facility, expected to be completed in 2009, is designed to meet the US FDA and worldwide regulatory standards. WuXi is one of the leading CROs in China and its success has sparked a wave of interest among VCs and other investors looking to tap into the rapidly growing pharmaceutical business in China. Already, the company has dozens of partnerships with top tier pharmaceutical companies who are looking to off-shore their medicinal chemistry capabilities to China to take advantage of cheaper labor costs. Back in January, WuXi acquired the US biologics firm AppTec Laboratory Services, a move that gave the Chinese firm a US beachhead and greater access to critically important large molecules expertise. This latest deal with Covance, one of the leaders in worldwide clinical testing services, shows that WuXi is interested in extending its offerings beyond chemistry to include GLP tox, drug metabolism, and bioanalytical chemistry services. Although the two companies have yet to team up on clinical trials, that's likely to be another area of interest. For Covance, a tie-up would ease its entry into a lucrative and still largely untapped market. For WuXi, it seems the Chinese giant is positioning itself to become "a truly integrated one-stop shop for offshore and low-cost drug R&D outsourcing in China," says Jinsong Du, an analyst with Credit Suisse in Hong Kong, told our sister publication PharmAsia News.

(Photo courtesy of Flickr user soaleha via a creative commons license.)

Viagra for All: The Political Backlash Continues

Interesting item in the National Journal that caught our eye: the Congressional vote in 2005 to cut off federal funding for erectile dysfunction therapies has become an issue in the Missouri governor's race.

Rep. Kenny Hulshof, one of the candidates vying for the Republican nomination in Missouri, was among the minority who voted to continue paying for Viagra and the other ED therapies in Medicaid and Medicare. State Treasurer Sarah Steelman is using that vote against him, including in this campaign ad.

As we wrote at the time of the vote, the debate over federal coverage of Viagra is more than a slap in the face to the companies in that market. It is also an object lesson in the consequences of the backlash against direct-to-consumer advertising, as well as the impact of Congressional meddling in federal coverage policies now that pharmaceuticals are included in the Medicare program.

Three years later, the political potency (no pun intended) of the issue is undiminished. And Big Pharma's reputation continues to be intertwined with the ED market to an extent that should make almost everyone uncomfortable.

Bear in mind that these are two Republican candidates, neither of whom is defending the proposition that taxpayer money should support the ED market. As the Journal reports, Hulshof is fighting back against Steelman by arguing that she also voted to support Medicaid funding for Viagra at the state level.

Was it really less than a decade ago that Bob Dole was doing commercials on behalf of Pfizer about ED, and effectively defining the market as medical--not recreational? Dole, we think, is still a Republican hero in the heartland. Of course, he is from Kansas.

Thursday, June 26, 2008

FDA and Review Meetings: Getting By With Less Advice

If you are having more trouble than usual trying to schedule a meeting with FDA review staff on a new drug application, you’re not alone. The agency has been denying more requests for meetings as it adjusts to a heavier workload.

And it’s not going to get better anytime soon.

As we’ve reported previously, FDA has been forced to re-prioritize its drug review duties in light of new responsibilities, most significantly the implementation of the FDA Amendments Act and “Safety First” initiative. As a result, Office of New Drugs director John Jenkins has directed his review divisions to miss certain deadlines set up by the user fee program in order to accomplish other tasks.

With all the progress FDA has made in hiring new medical reviewers and the recent bolus of new cash from Congress, you might think the agency would be able to return to its historical Prescription Drug User Fee Act (PDUFA) goal rates soon—if not already. Unfortunately for drug sponsors, they're not even close.

During a “CDER Live” panel discussion at the Drug Information Association’s annual meeting, the question of when FDA would be able to return to its regular PDUFA review schedule was broached by industry representatives on several different occasions. At least by one account, the extra work has led the agency to deny requests for pre-IND and end-of-Phase II meetings—vital interactions with FDA reviewers for drug sponsors.

Jenkins acknowledged that his office was cutting back on certain meeting requests, noting that they tend to be quite labor intensive. (Meetings with FDA have risen exponentially in recent years, and a single meeting with a drug sponsor can be preceded with three or four internal “pre-meetings” among FDA officials.) “We’re not ignoring those meeting requests; we’re making strategic decisions about which ones we can grant and which ones we can’t grant.”

Jenkins isn't happy about the current situation, but there isn't much he can do about it. “Those meetings are valuable and very important,” he said. “The IND part of our work is, in many ways, the most fascinating and stimulating part of our work, and we don’t like that we have to cut back in those areas. But that’s the reality.”

That reality won’t change until FDA can right its workload imbalance. “We have a lot more work on our plate than we have people in our building to help us get the work done. So we’ve had to make some prioritizations; we’ve had to make some decisions about what we can and cannot do,” Jenkins said.

“Some of that has resulted in missing PDUFA goal dates. I cannot tell you when that will not be the case,” he said. “It’s going to change when we are able to recruit and staff and train so that we have adequate people to do the work that we have on our plate. I think that’s going to take some time.”

For drug sponsors, that means getting by with less advice from the agency—and that means lower-quality NDA submissions. For some idea as to how long it could be before things improve, consider this: It takes two to four years for FDA brass to train new reviewers.

And you thought approval rates were low now.

(Photo courtesy of Flickr user bhell13 via a creative commons license.)

Takes a Saint

Lost in the news that Boston Scientific is continuing to sell off pieces of itself was the creation of a new venture capital fund affiliated with secondary buyer Saints Capital.

Saints raised $165 million for new fund, Saints Everest. It paid $100 million for 54 companies from Boston Scientific's venture portfolio. Its investors include Adams Capital Management and Harbourvest Partners LLC, according to Scott Halsted, the firms' new managing director.

In a separate deal, Boston Scientific agreed to sell another portfolio of venture funds and companies to Paul Capital Partners for roughly $40 million. The proceeds of both rounds would go toward paying down Boston Scientific's debt.

We've reported extensively on Boston Scientific's disassembling of itself by selling off unwanted divisions such as its cardiac and vascular businesses as well as its endovascular business.

Halsted--who left Morgan Stanley Venture Partners last fall as it stopped making new investments in health care companies--will lead the new Saints Everest effort, which will manage former Boston Scientific properties--including companies like Asthmatx Inc. and Broncus Technologies Inc.--and make some new investments as well.

He plans on bringing aboard additional staff to manage current and future investments.

Halsted said closing the fund--as well as his hiring--is contingent upon the closing of the deal for Boston Scientific to sell the 54 companies to Saints Capital. Halsted said other parties were interested in acquiring Boston Scientific's stakes in more than four dozen life sciences start-ups.

The $100 million price tag gives Saints Everest $65 million to invest in follow-on rounds for the BSX portfolio. It's a relatively modest amount, but Halsted said Saints would be able to participate in any attractive follow-on rounds. Halsted suggested some companies in the portfolio--which he couldn't identify per an agreement with Boston Scientific--might not need additional capital.

But he also anticipates making new investments in medical device, health care IT and health care services companies through the new Saints fund. It's unclear whether a second Saints Everest will be raised or if future investments would come from other of the firm's funds.

We'll have more on Saints/BSX in the upcoming START-UP.


Yesterday's VentureWire Lifescience reported the Fischell family is up to its old tricks again. Colleague Mary Stuart profiled the prolific clan in our April START-UP magazine:

Four members of one family are collectively responsible for filing more than 200 patents in the medical device field, founding more than 14 device companies, including NeuroPace, Neuralieve, Angel Medical, Svelte Medical and GlucoTec, and
inventing the world's most widely-used implantable medical device in the history of the industry, the stent design sold by Johnson & Johnson as the Bx Velocity.
The article also included a short snippet on Svelte Medical Inc., the subject of the VentureWire article which reports Svelte raising a $6 million Series A from a syndicate of interesting investors including "Burpee Materials Technology LLC, a medical device manufacturing company based in Eatontown, N.J.; Via Biomedical Inc., a medical device developer based in Maple Grove, Minn.; SMS Ventures; the Fischell family; and other individual investors."

David Fischell, one of three sons of Robert Fischell, says the round will be used to get into first-in-man trials in the fall. At that time the company will look to raise a larger round. Tim Fischell, another son, gave Mary some interesting details on the company's stent technology including the origins of its technology and its new delivery system. "I think it has the potential to be viewed as the next-generation advance in stent delivery," Tim Fischell is quoted in the START-UP article.

As always, we welcome your comments. If you have any private suggestions, comments or care to compliment me on my first second-place Fantasy baseball team email me here.

Playing with $6 Billion: CBO Unveils Follow-On Biologics Savings Estimates

The analysts at the Congressional Budget Office have been busy little beavers. As we cautioned earlier, CBO has been actively scoring the possible cost savings of the introduction of follow-on biologics in the US through an abbreviated pathway.

The agency released the estimates June 25 and the numbers certainly will re-ignite the follow-on biologics debate. Using the Senate Biologics Price Competition and Innovation Act to evaluate savings, CBO found FOBs would save $6.6 billion in direct government spending over a 10-year period, beginning in 2009. That's real money. To read the full analysis, click here.

The $6.6 billion comes in higher than some of the lower-end estimates and at about half the amount of the higher-end estimates. Two points to consider:

Timing: Releasing the savings analysis on June 25 begs a few questions to be asked. Were the findings unveiled ahead of the July Congressional recess so they could not be acted upon swiftly by lawmakers looking for a rest? Or does the scoring have a relationship to the Medicare package, which includes the physician payment cut offset, that just passed through the House? After all, the $6.6 billion would serve as a nice bargaining chip for the physician payment fix? Or is it all a coincidence?

Although we don't believe in coincidences, we have not heard from any sources with a stake in the game that FOBs will be attached to the Medicare package, which already has its share of somewhat controversial provisions like e-prescribing and codifying the six "protected" drug classes under Medicare Part D. To read more, click here.

Still, you never know what's going on behind closed-door negotiations, especially considering the exclusive number of Congressional leaders who are crafting the legislation. But the odds are quite small that FOBs gets attached to a must-pass Democratic or Republican offering because it would require serious and immediate action from the Senate HELP and Judiciary Committees, specifically Ted Kennedy (D-Mass.), Orrin Hatch (R-Utah), Hillary Clinton (2nd Place, Democratic nominee for President) and Mike Enzi (R-Wyo.).

How Will House Leadership React: Because the Senate HELP Committee requested the CBO analysis, it is based on the BPCIA, which gives innovators a period of 12 years of data exclusivity. At this point, that's a biotech-friendly period of exclusivity. House Committee for Oversight and Government Reform Chairman Henry Waxman (D-Calif.) and House Energy and Commerce Chairman John Dingell are understood to be looking at eight years of exclusivity and less. So they would, no doubt, hold up any legislation that includes FOBs and 12 years of exclusivity. That's not to say 12 years ends up getting the axe; we're just saying there's no way it stays 12 years without a fight from Waxman and others.

Here's an interesting take from one knowledgeable source:

"It is worth considering that the starkly competing and now “switched” views coming out of the two “sides” of the industry – GPhA essentially saying the score means the current legislation is bad and needs to be fixed (presumably by the next Congress), and BIO essentially saying the score means the current legislation is good and needs to be passed by this Congress – could result in the perception of a “draw” in the clash of the titans, which begs the question as to whether there would be sufficient momentum to get this onto the Medicare package or any other vehicle during the 110th based upon this score....Of course, stranger things have happened in this and past Congresses."

While we don't think, as of this moment, FOBs will get attached to a Medicare bill, the $6.6 billion in savings and the timing of the release is turning out to be a real bee in our bonnet. Why now? We'll continue to investigate. In the meantime, take a look at the CBO analysis. There's a lot to digest.

Wednesday, June 25, 2008

Health Care Reform is Coming: What Does it Mean for You?

No, we aren't going to answer that question. You are.

We are pleased to be working with the Boston Consulting Group on a survey of the implications for different health care industries of the US Presidential candidates' health care policy proposals. We hope to hear from smart, forward-looking executives in the health care industry (yes, if you read this blog, you qualify) on how they assess the potential impact of the two plans.

Here is the link to the survey. It only takes a few minutes to complete. Results are completely anonymous, and will not be attributable to you or your organization.

We will be publishing the results, along with in-depth analysis conducted by BCG based on the priorities you identify.

So let's hear it: what will health care reform mean for you and your company?

New Business Models for Personalized Medicine: Look to the Stars?

Rare diseases have often been the starting point for breakthroughs in medicine and biology: Oliver Sachs, for one, has made a career out of writing about rare neurological conditions as a window to a deeper understanding of how the human brain works.

Can business models built around rare diseases similarly serve as a starting point for a breakthrough in understanding or even reinventing the biopharmaceutical industry business model?

If a thought provoking forum hosted by the Institute of Medicine June 23 is any indication, the answer may be yes.

Entitled "Breakthrough Business Models: Drug Development for Rare and Neglected Diseases and Individualized Therapies," the workshop took an in-depth look at creative approaches to drug development. We were fascinated by approaches like the sustainable non-profit vision of the Institute for OneWorld Health, the patient advocate-driven research agenda crafted by the Cystic Fibrosis Foundation, Peter Corr's new venture with Celtic Therapeutics, and the orphan-drug as blockbuster model created and maybe perfected by Genzyme. And that was just the first panel!

Rare and neglected diseases may not sound like a promising opening for pharma execs struggling to make up for looming losses of blockbuster brands. But a little perspective is useful. Most in industry would agree that the future will bring many more specialty products focusing on relatively smaller patient populations, for a whole host of reasons--scientific advances in understanding the basis of disease, regulatory concerns about safety, payor insistence of value versus standard therapy, etc. etc.

In other words, the question may not be whether Big Pharma needs to focus more on rare diseases, but rather how Big Pharma can best prepare for a world in which, in effect, every disease is rare.

That, at least, is the argument that Tim Cote, head of the Food & Drug Administration's Office of Orphan Products Development, is making. He made it in person during the Pharmaceutical Research & Manufacturers of America trade meeting earlier this year, and repeated some of the points during the IoM forum. Cote wants Big Pharma to take more interest in the orphan drug program, since, as he points out, it has been largely the province of biotech companies.

Cote also highlighted some earlier work by IoM in the area that may now be a must-read for everyone in drug development: a 2001 report on "Small Clinical Trials."

Talk about a problem most Big Pharma R&D heads haven't had to think about! In an era where the central question has been how to keep the cost of Phase III trials below the billion dollar mark, most executives probably haven't spent a lot of time wrestling with the challenges of generating a robust data package from a study involving dozens--or even fewer--patients.

But that just might be the central regulatory challenge for the personalized medicine era.

It may feel like we've gone to another world here, but that is only appropriate. As Cote pointed out, the 2001 IoM report was commissioned by the National Air & Space Administration, which wanted to understand as much as possible about the effects of zero gravity on human health. NASA, as Cote points out, has "a lot of data, but very few astronauts."

One small step....

Prasugrel Delay Shifts Focus to August Advisory Committee Date

Attention will now turn to a tentative August 19-20 FDA Cardiovascular and Renal Drugs Advisory Committee meeting date as the next major prasugrel milestone after FDA extended the review of the novel anti-platelet drug by three months on June 23.

The original user fee deadline for the priority six-month review application had been scheduled for June 26; the new deadline is September 26.

The agency has yet to make public the agenda—or whether they’ll even hold a meeting—for the tentative August date. The drug's manufacturer, Eli Lilly, says it has not been notified by FDA that prasugrel (Effient) will be the subject for review at the meeting, if FDA chooses to hold one.

Whether or not prasugrel gets slated for an advisory committee review is at the center of speculation regarding the future of the potential blockbuster. A panel meeting would provide some level of clarity to FDA’s position on the application in the form of questions to the committee and public briefing documents related to the agency’s medical review of prasugrel data. However, it also adds the variable of a group of scientific experts from different disciplines questioning the merits and scrutinizing the safety concerns of the drug in a public setting.

A late August advisory committee meeting would also put FDA under a time crunch to deliver a decision by the new September deadline given the additional guidance it will have to process from the panel.

Senior FDA officials have said in the past that if the benefits of a drug are so obvious to agency reviewers and clearly outweigh the risks, an advisory committee meeting is sometimes unnecessary. However, a major drug safety issue that fosters consensus among FDA reviewers could also render convening a panel of outside experts to review the drug a needless exercise, officials have cautioned.

In renal cell carcinoma market, for example, Bayer/Onyx’ sorafenib (Nexavar) and Pfizer’s sutinib (Sutent) both were priority reviews that resulted in timely approvals without advisory committees. Both were viewed as significant advances in renal cell carcinoma therapy, an area that had not seen major advances in years.

The extension is a minor setback for Lilly and is certainly a better outcome for the company than a number of different decisions the agency could have made.

A three-month extension is relatively common for new therapies that may carry extensive postmarket requirements, such as risk management plans. The extension is triggered if the sponsor submits significant supplemental information to FDA during an ongoing review and the agency simply needs more time to comb through the additional data.

The extension keeps the application in a first-cycle review timeline. An “approvable” or “non-approvable” decision at this point would have been significantly less favorable for Lilly and require the company to re-submit the application and restart the review clock.

“We will continue to work closely with the FDA throughout the review process and continue discussions to determine if any requirements under the new FDA Amendments Act (FDAAA) will apply,” Lilly VP-global regulatory affairs Jennifer Stotka said in a statement.

Lilly’s public reference to FDAAA indicates the company may be working on a REMS (risk evaluation and mitigation strategies) program for the drug, which would further explain the extension. REMS were created under the new drug reform law to improve postmarket surveillance of drugs entering the market.

Biogen Idec/Elan’s natalizumab (Tysabri) for Crohn’s disease and Celgene’s cancer drug lenalidomide (Revlimid) are two recent examples of drugs that received three-month deadline extensions to review risk management programs but were approved promptly thereafter.

Lilly’s Phase III 13,000-patient TRITON clinical study of prasugrel produced a 19% reduction in the composite primary endpoint of cardiovascular death, non-fatal heart attacks or non-fatal strokes when compared with clopidogrel (Plavix).

However, the study also demonstrated a statistically significant 32% increase in minor and major bleeding. But when you consider the primary endpoint, those bleeds didn’t lead to deaths, heart attacks or strokes.

Tuesday, June 24, 2008

Did Pfizer Get A Wedding Favor From Ranbaxy And Daiichi?

By now, you’ve probably heard that Ranbaxy and Daiichi have fallen in love—or at least entered a mutually binding financial agreement to that effect.

So where does this leave others who had a relationship with Ranbaxy—like Pfizer, for example? The brand and generic giants were never romantically linked (although there were rumors) but they did have an involvement that touched each to the core: Ranbaxy was the first-to-file challenger for Pfizer’s mega-blockbuster Lipitor, and they’ve been in court ever since.

But now the fight seems to be over: A week after Ranbaxy and Daiichi announced they were tying the knot, Ranbaxy and Pfizer said they were cutting a deal to end their legal entanglement.

It gives Pfizer closure on its love affair with the blockbuster statin, but what does it do for Ranbaxy? Well, it provides a fair bit of certainty in terms of revenue projection—and that may be what a company looking to settle down wants—but we wondered whether Ranbaxy could have gotten a better deal if it didn’t have to worry about what another corporation would think about it.

Did Daiichi’s heft make Pfizer take the risk of an “at risk” launch more seriously, or did Daiichi tell Ranbaxy that once they moved in together it couldn’t stay out carousing all night in strange legal jurisdictions?

In the discussions we’ve had on the matter, people tend to be divided. Those who look at the world through a merger lens think that Daiichi acted as a sensible ball and chain, helping to wrap up a potentially damaging distraction before it got out of hand. Those who spend their time thinking about selling products and suing people, though, think that Daiichi may have offered a nice dowry that Pfizer was afraid could become a war chest.

Tell us what you think!

--M. Nielsen Hobbs

(Photo courtesy of Flickr user Pardesi via a creative commons license.)

Wacky World of Generics: Pajama Party Edition

Have you ever had one of those dreams where you show up to the office in your pajamas? Well, it can be argued that the generics industry has been doing just that lately and it’s been working well for them.

The reason for the casual dress is FDA’s current policy on 180-day exclusivity for first-to-file generics. The agency awards the much sought-after exclusivity people to the first-to-file generic applicant, even if the ANDA isn’t terribly professional looking. The application doesn’t have to be all showered and combed to be eligible for those six very profitable months when the sponsor is the only generic on the market.

Due in part to this policy, many applications have been coming into FDA’s Office of Generic Drugs quite early, and it’s starting to look like the kind of place where people walk around in purple slippers. (We are pleased with this analogy because generic firms did in fact used to have sleepovers at FDA, camping outside the office in order to be first-to-file. The agency solved the problem by saying that everyone who submitted an application on the same day had to share. How to solve the problem of messy applications seems a bit more complicated.)

A report by the HHS Inspector General details the problems that FDA has been having trying to keep pace with the flood of submissions. As a result of the deluge, the agency has failed to meet the review deadline for nearly half of the applications it received, and has approved only 4 percent the applications on the initial cycle.

FDA, though, does not seem enthusiastic about the advice that the IG report offers as a fix, which would involve reprioritizing the order of reviews to focus on applications that were closest to approval. Instead, the agency is beefing up its review staff, and new legislative provisions that trigger the forfeiture of generic exclusivity may encourage better, slower application development (subscribers to “The Pink Sheet” can read the details).

But in the meantime, the document room in the Office of Generic Drugs isn’t going to be winning any fashion awards.

--M. Nielsen Hobbs

(Pajama image courtesy of Flickr user Iroma Baby via a creative commons license.)

Monday, June 23, 2008

Prasugrel: Signs Point to FDA Approval

[Update: Well, it looks like Lilly will have to wait on the champagne, at least for now. FDA extended the review of prasugrel by three months after receiving "supplemental information" during the review. "We will continue to work closely with the FDA throughout the review process and continue discussions to determine if any requirements under the new FDA Amendments Act (FDAAA) will apply," Lilly VP-global regulatory affairs Jennifer Stotka said in a statement. To read the full release, click here.]

There’s nothing like a ticking clock as a deadline approaches to ratchet up the drama behind an FDA decision. Remember Provenge? On June 26, or possibly before then, Eli Lilly will find out whether its novel blood thinner prasugrel (Effient) will be granted approval, delayed or rejected.

We think Lilly may want to get the champagne ready. Here’s why:

1) The Data: When it comes to FDA approvals, it’s all about the data. No question. In Lilly’s Phase III 13,000-patient TRITON clinical study, prasugrel produced a 19% reduction in the composite primary endpoint of cardiovascular death, non-fatal heart attacks or non-fatal strokes when compared with clopidogrel (Plavix). By any standard, that’s a compelling result.

There’s been a lot of finger pointing regarding a more cautious FDA when it comes to new drug approvals and we’re not going to dismiss that here. However, sometimes the cases used as evidence to make that argument were for drugs that missed their primary endpoints or made it by the skin of their teeth and had important safety questions.

Those expecting an FDA decision to delay the application point to the statistically significant 32% increase in minor and major bleeding. That’s a strong point against approval in today’s regulatory environment. But when you consider the primary endpoint, those bleeds didn’t lead to deaths, heart attacks or strokes. To read more about our coverage of prasugrel, click here.

2) Priority Review: We think a lot of the hard work on prasugrel was done prior to the priority review designation. Here is what FDA says warrants that designation:

“A priority review designation is given to drugs that offer major advances in treatment, or provide a treatment where no adequate therapy exists....The distinction between priority and standard review times is that additional FDA attention and resources will be directed to drugs that have the potential to provide significant advances in treatment.
Such advances can be demonstrated by, for example:

a) evidence of increased effectiveness in treatment, prevention, or diagnosis of disease;

b) elimination or substantial reduction of a treatment-limiting drug reaction;

c) documented enhancement of patient willingness or ability to take the drug according to the required schedule and dose; or

d) evidence of safety and effectiveness in a new subpopulation, such as children.

Designation of a drug as “priority” does not alter the scientific/medical standard for approval or the quality of evidence necessary.”

FDA Office of New Drugs director John Jenkins is one of the most vocal advocates of the value linked to getting a priority review. He often cites the designation as the most telltale sign that a drug will receive a positive, first-cycle decision. It may be a leap, but we doubt such a high-profile drug in a treatment area with an established gold standard would have received a priority review without FDA having a strong idea of what they were going to do with it.

3) The (absence of an) Advisory Committee: This is another positive sign for Lilly, in our opinion. Why? Read this quote from former FDA drug center Steve Galson at a 2006 Stanford Research Group meeting in Washington:

“If it’s clear that the drug is very advantageous and helpful [then an advisory committee may not be necessary]…we’re just wasting everyone’s time because it’s obvious that this drug has to get on the market. On the contrary, if there’s some major drug safety issue that we know there isn’t any real disagreement...then we also don’t want to waste everyone’s time at a whole meeting.”

We think the former is the case with prasugrel when you pair it with the priority review. For example, if you look at Bayer/Onyx’ and Pfizer’s renal cell carcinoma drugs sorafenib (Nexavar) and sutinib (Sutent), respectively, both were priority reviews that resulted in timely approval without advisory committees. Both were viewed as significant advances in renal cell carcinoma therapy, an area that had been bereft of new treatments for years.

4) Sending a Message: Approving prasugrel by the PDUFA deadline would send a strong message to FDA stakeholders that the agency is willing to approve innovative drugs—that carry a pre-determined risk—in a timely fashion if the treatments demonstrate a real benefit to patients. Prasugrel appears to fall in that category. Moreover, a swift approval that meets the user fee deadline would allay many concerns over an FDA memo allowing reviewers to extend deadlines. To read more, click here.

5) Nissen Says Thumbs Up: Controversial Cleveland Clinic cardiologist Steve Nissen has been on record as saying prasugrel is “a good drug that should get approved.” Need we say more?

6) Bad Cordaptive Comparison: Drug company executives, the investment community, and FDA watchers highlight FDA’s decision to delay/kill Merck’s combo cholesterol drug niacin/laropiprant (Cordaptive) with a “non-approvable” letter in late April as a sign that prasugrel could get disappointing news. This is an apple and oranges comparison. Cordaptive was a standard review application in an area, cholesterol therapy, with an extensive number of effective treatments. Moreover, there appeared to be questions over the long-term risks of the anti-flushing agent laropiprant. When FDA reviews combo drugs there must be evidence that each component of the combination product makes a substantial contribution to the safety and/or efficacy of the combination product. In other words, the combination product has to be shown to be more safe and/or effective than either product alone. Clearly, FDA didn’t feel that was the case with Cordaptive.

Two key questions that will impact the decision and whether it will be made by June 26 are: 1) Who made the priority review decision?; and 2) Will prasugrel require an onerous REMS (risk evaluation and mitigation strategies) postmarket surveillance program?

If an office-level director, or Jenkins himself, signed off on the priority review, that bodes better for prasugrel’s chances of approval. It diminishes the chances of an intervention from a higher-ranking official to delay the decision.

We asked FDA who actually decides whether a drug is granted a priority review. Here’s what an FDA spokesperson says: “The decision on priority review designation is made by the OND division director based on a recommendation from the review team and based on the CDER standard as articulated in our guidance.”

The division director in this case is Norman Stockbridge, who reports into Office of Drug Evaluation I director Robert Temple.

As the decision relates to risk management, if a burdensome REMS program is required to monitor the bleeding risk, it could take a few extra months to work out the details.

In the end, based on the tea leaves, that FDA will approve prasugrel with a warning (not black-box) on bleeds and a REMS program that includes a prescribing MedGuide for patients, a physician education program and a postmarket study.

Now it's just a game of wait and see.

While You Were Cheering on the Celtics

Yes, yes, yes, the rolling rally for the World Champion Boston Celtics was Thursday, not this weekend, so the typical "While you were.." parameters might not apply. And, IN VIVO Blog hears that Boston sports teams and their fans aren't all that popular these days, so it's unlikely many of you were cheering for the Green anyway.

But Mark Wan, general partner of Three Arch Partners, was cheering, and we've got pictures (courtesy of the Boston Globe.)

Wan, the cross-armed fellow in the Celtics Green T-shirt, is part of the ownership team that includes many life sciences/

venture capital types including Wyc Grousbeck, Highland Capital Partners, Richard H. Aldrich, Senior Vice President and Chief Business Officer, RA Capital Associates; David Bonderman, Managing Director, Texas Pacific Group; James Breyer, General Partner, Accel Partners and many others.

No doubt, Wan hasn't faced this big or energetic a crowd since he attended one of our medical device conferences.

Now, onto some news from this weekend.

  • Eli Lilly might hire a few Duck Boats itself if the FDA gives a thumbs up this week on use of its anticlotting drug prasugrel. The Wall Street Journal says analysts aren't ready to hop on Lilly's bandwagon just yet, in some cases giving Lilly slightly better than a 50% chance of getting approval. That's okay, seven out of eight of ESPN's so-called experts picked the Lakers.

  • European pharma execs are at a bit of a loss. The International Herald Tribune reported on the gloomy mood from the European Federation of Pharmaceutical Industries and Associations where executives at top European pharmaceutical companies wondered how to stop the industry's tailspin. Diversification? Increased R&D? Everything is on the table.

  • According to the The Wall Street Journal, Merck and Schering-Plough got a dose of bad news/good news regarding US prescriptions for their co-marketed cholesterol drugs, Vytorin and Zetia. IMS Health Inc. says sales of the drugs slipped in May, but at a smaller rate than in previous months. Prescriptions for the two drugs dropped 1.1% to 2.5 million last month after declining 23% since January. The drugs began taking a dive when data from an "Enhance" trial showed showed that Vytorin, which is a combination of Zetia and the generic drug simvastatin didn't perform any better than simvastatin alone "at slowing thickening of the arteries despite producing a greater decline in bad cholesterol." Simvastatin was once known as Merck's Zocor before its patent expired in 2006.

  • Finally, the Corn Refiners Association wants you to have a Coke AND a smile.

  • Friday, June 20, 2008

    DotW: Easy Livin'

    Today marks the official start of summer (at least for those of us in the Northern climes). With another BIO fest put to bed, pharma and biotech execs--and, according to the Boston Globe, politocos--can get down to the serious business of the season: BBQs and beer. Certainly the news flow this week--from the partying in San Diego to the resolution of several long-standing disputes--contributed to the sense of easy living.

    Biogen Idec employees and shareholders have reason to crack open a cold one: Carl Icahn has officially called off his efforts to install three dissident nominees to the company’s board, the Associated Press reports. Could this really be the final chapter in what the WSJ calls Carl's colorful efforts to force a sale of Biogen? (Will Carl change his name to Icahnt as a result?)

    Meantime, Pfizer execs can breathe a little easier now that they've reached a settlement with the Indian drug manufacturer Ranbaxy that will delay the introduction of generic Lipitor by about 20 months. The settlement guarantees Pfizer an additional $10 billion to $15 billion in brand-name Lipitor revenue from March 2010 through November 2011. BNet's David Hamilton notes the agreement is definitely good for Pfizer, allowing the company to quash ugly rumors about the disappearance of its dividend--at least for now.

    We're happy to report that J&J and The Red Cross have also resolved their differences: the two giants reached a deal that will allow both to use the legendary emblem they've shared for over 100 years.

    No easy times at Schering-Plough, but that hasn't stopped CEO Fred Hassan from adopting a zen-like attitude about his company's slumping share price--down more than 25% this year--as Marshall Goldsmith tells in this softball Business Week Q&A. You'll be happy to know that when times get tough, Hassan embraces his "emotional intelligence" in order to "empathize with others so you can earn their trust." According to Hassan, "The key is confronting the reality you face and dealing with it with courage and tenacity." (So that's the secret. I thought it was cheap stock options.)

    Take a tip from Fred and celebrate the good life with another edition of...
    Sanofi Aventis/Zentiva: Another week, another pharma makes a bid for a generics company. Last week, the big news was Daiichi's bold purchase of a controlling interest in Ranbaxy. This week news surfaced that Sanofi Aventis offered $2.6 billion to purchase the outstanding shares of Zentiva, a Czech generics outfit. Like last week's Daiichi/Ranbaxy tie-up (now unlikely to be scuppered by a competing bid from Pfizer), this deal appears to be about Sanofi's need to diversify beyond its traditional pharmaceutical business. It's also about tapping into a potentially valuable emerging middle class market--in this case, Eastern Europe. Sanofi, which already owned about 25% of Zentiva, may have been spurred to action by the Czech finance group PPF, which offered to buy the generics maker in early May. (Sanofi's bid represents an 11% premium to that of PPF.) But it's not hard to see why owning a bigger stake of Zentiva might be good for the French pharma, which faces patent expiries on two blockbusters, Plavix and Lovenox. If successful, Bloomberg News says Sanofi would add more than 180 generic medicines to its portfolio, including copies of Bristol-Myers Squibb’s Glucophage and Merck’s Zocor, at a time when the market for generics is growing at twice the rate of brand-name medicines. Still, it's clear there are two schools of thought when it comes to a diversified business model. Sanofi appears to be following in the footsteps of Daiichi and European rival Novartis, which has seen solid growth from its Sandoz unit. But the growth strategy is completely opposite from the approach taken by Takeda and Bristol, which have shed non-core pharma assets in order to invest in interesting R&D.

    Kyowa Hakko/Alnylam: Another week, another Japanese deal. Remember Takeda's big RNAi deal with Alnylam at the end of May? One product not included in the tie-up was the biotech's lead clinical compound, ALN-RSV01, which is currently in Phase II clinical trials for the treatment of respiratory syncytial virus. On Thursday, Alnylam announced it had signed an exclusive alliance to develop and commercialize that drug in Japan and other major Asian markets with Kyowa Hakko. Kyowa will pay $15 million upfront and up to an additional $78 million in development and sales milestone payments for the privilege. It also promised to pay double-digit royalties based on the sales of ALN-RSV01 in this territory. In exchange, Kyowa will also have access to Alnylam's additional downstream RSV-specific RNAi compounds. Importantly, Alnylam retains all development and commercialization rights worldwide excluding Asia. This is Alnylam's third deal in 2008 and shows the company's willingness to aggressively monetize its platform. While this latest deal isn't all that big in bio-bucks, it fulfills the biotech's strategy to find an Asian partner for this particular program, which wasn't included in the larger agreement with Takeda because of that pharma's general lack of interest in the antiviral space. In an interview a few weeks ago, CEO John Maragonore noted the company felt it was better to exclude the RSV program from the Takeda transaction in order to fully maximize its value. "We had the feeling that ALN-RSV01's overall value would get lost in other considerations of the deal,” he said. And now we know what the program is worth--at least to Kyowa Hakko.

    Boehringer Ingelheim/Actimis: We distinctly don’t know what Actimis Pharmaceuticals’ Phase I anti-asthma project, AP768, is worth to its kind-a, sort-a acquirer, Boehringer Ingelheim. BI apparently wants the compound but not the rest of Actimis so the little-known San Diego company will spin off the non-AP768 bits into a new company and let BI acquire what’s left. BI will buy Actimis in stages, as AP768 proves itself but the unhelpful PR (which touts this as a $515 million acquisition, granted the compound gets into Phase III) doesn’t give any real sense of the value to Actimis’ investors, the largest of which are Sanderling and Mitsui Venture Partners. Actimis CEO Peter McWilliams wasn’t much more helpful when he spoke with our colleagues at The Pink Sheet Daily. What it does imply, however, is that the VCs, who financed the company’s spin-off from Bayer in 2005, don’t want to put any more money into the compound’s clinical development and are instead willing to limit their upside by letting BI finance the rest of the work through share purchases. Presumably the first slug of money will return at least part of the Sanderling/Mitsui investment and, if the drug continues to perform, subsequent purchases will actually make them some money. And not a bad deal for BI, either. If the drug works, BI will have paid for the entire thing with capitalizable equity (OK, not a big thing for a private company like BI, but an interesting model for any public company looking to replicate the deal) and, presumably, won't owe any royalties on it.

    Roche/ThromboGenics & BioInvent: On Wednesday Belgian based ThromboGenics and Swedish antibody maker BioInvent announced they had partnered their jointly developed anticancer monoclonal antibody, TB-403, with Roche. Deal terms for the early stage mAB (it just finished a Phase Ia trial) were generous: the two biotechs will split the $77.4 upfront payment 60/40. The companies could also receive close to $700 in downstream development and commercial milestones if the drug pans out in multiple indications. In addition, Roche has agreed to pick up all additional development costs for TB-403 beyond the clinical trial already in progress and will pay the biotechs to research the possible utility of the antibody in other non-cancer arenas. In return, Roche has worldwide marketing rights to the product, with BioInvent and ThromboGenics retaining co-marketing rights in Belgium, the Netherlands, Luxembourg and the Baltic and Nordic Regions. TB-403 works by inhibiting a specific protein, Placental Growth Factor (PIGF), cutting off blood flow to tumors via a different mechanism than other VEGF inhibitors such as Genentech's Avastin. Indeed, a study published in the November Cell showed that anti-PIGF antibodies appear to starve tumor blood vessels without impacting the vasculature in healthy tissues, a side-effect commonly associated with current tumor-fighting treatments. Thanks to its Genentech ties, Roche is well versed in angiogenesis inhibitors and clearly liked what it saw despite the dearth of human data associated with the antibody. Competition for hot oncology targets is, of course, fierce and that likely drove up the deal value for TB-403.

    Medicis/Liposonix: We opine in our June START-UP (which went to press last week) about pre-commercial device companies not standing a snowball’s chance in a sauna of achieving a respectable exit. And this week, Medicis went and proved us wrong, paying $150 million for Liposonix, the developer of an ultrasonic body sculpting technology due to premiere on the US market sometime after 2011. (If the launch goes well, Liposonix investors stand to receive another $150 million in commercial milestone payments.) Liposonix's story echoes that of many medtech/ device companies: VCs are holding such outfits in their portfolios longer than ever--longer even than biopharma investments--and putting up far more dollars than they used to. After almost ten years and $40 million, Accuitive Medical Ventures, The Carlyle Group, Delphi Ventures, Essex Woodlands Health Venture, Pinnacle Ventures, Three Arch Partners, SV Life Sciences, and Versant Ventures must be breathing a sigh of relief that Liposonix finally found just the right mid-sized acquirer. Medicis has a successful wrinkle-reducer, Restylane, and is about to launch Reloxin, its Botox alternative. With almost $465 million in sales in 2007, Medicis certainly has the heft to continue Liposonix’s clinical trials and could be first to market with this long-awaited device that melts isolated pockets of fat away without surgery or actual physical exertion.

    (Photo courtesy of Flickr user thovie333 via a creative commons license.)

    Wacky World of Generics: Lipitor Edition--Or The End of The World as We Knew It

    Circle the date: November 30, 2011.

    That is the date when the first generic version of Pfizer's ultra-super-megablockbuster atorvastatin (Lipitor) will enter the market. At least, it sure looks that way after Pfizer and Ranbaxy settled patent litigation in the US and several other important markets. (You can read all about the settlement in The Pink Sheet DAILY.)

    It will be the largest generic launch in history. And it will be as good a date as any to declare the end of the blockbuster era.

    That's because Lipitor is not only too big for Pfizer to replace, it is--figuratively at least--too big for the industry to replace. There is simply too much infrastructure and too few blockbusters to replace Lipitor--or Plavix, or Zyprexa, etc. etc.

    By now, the patent "cliff" facing Big Pharma at the start of the next decade is well understood. Less clear is what the industry will look like when it emerges on the other side.

    The Pfizer/Ranbaxy settlement agreement certainly doesn't answer that question. But it does do two things. First of all, it assures Pfizer of an extra year of protection on Lipitor beyond the earliest potential "at-risk" launch date of a generic, and about five months more protection than investors seemed to expect. For a brand generating about $7.5 billion a year in the US, that is big news. (So big, in fact, that the settlement caused UBS to cut its ratings on some of the largest pharmacy benefit management companies in the US, because they will miss out on the potential profits from a generic launch in 2010.)

    More importantly, it sets a deadline for Pfizer to settle on its post-Lipitor future. We have already offered one modest proposal for the company to think about, but there are plenty of other creative ideas around for how Pfizer could reinvent itself. (Not to mention old standbys like buying Wyeth or Amgen or Merck or all three.)

    The point is that Pfizer now knows when the day after Lipitor will come. There is nothing like a deadline to focus the mind.

    Out-Partnering II: Self-Interested Sharing

    In our last out-partnering post, we suggested the possibility that out-partnering could spur a wholesale change in business model, using Pfizer and the potential virtues of spin-outs as Exhibit A.

    Today we turn to out-partnering as biotechs are learning to do it…and as, we (humbly) suggest, Big Pharma should too.

    Take Alnylam, a biotech more than usually cognizant of the diminishing value of its core technology.

    Alnylam’s strategy is to do everything it can to more durably asset-ize its RNAi platform’s temporary tech value. In terms of dealmaking, that’s largely meant selling the platform for cash (viz deals with Novartis and Roche) while RNAi technology is still rare. (In other words, before companies like Dicerna and maybe MDRNA catch up and dilute Alnylam's partnering value).

    But more recently Alnylam's been selling the platform for money and potential products – the point of its Takeda deal (see our discussion here). Along with $100 million up-front and $50 million in near-term fees, Alnylam gets a reciprocal first right of negotiation on any project Takeda decides to shop in the US and more importantly, opt-in rights for 50/50 co-dev/co-commercialization deals in the US on up to four Takeda programs of its choosing (exercisable all the way through the start of Phase III).

    Despite its sparse infrastructure, negative cash flow and infinite PE multiple – all hallmarks of biotech -- Alnylam is in fact acting kind of like a Big Pharma – providing value to its partner in return for downstream commercial rights.

    Which leads to this question: why isn’t Merck doing the exact same thing with the RNAi platform it got from Sirna? Merck certainly knows it can’t possibly exploit all that technology itself, as does Alnylam, but it isn’t pursuing the logical next step, selling it to another company in return for downstream rights.

    There are probably a thousand practical reasons for not doing it. Among them: Merck isn’t set up to do it; it's expensive; and technology isn’t really packageable. But the real reason is strategic habit. Drug companies do not share, even when it’s against their interests not to. Drug companies still believe that owning a broad swathe of discovery-stage territory confers on them some temporal or intellectual advantage, despite the fact that 99% of discovery programs will fail. Which means that if you’ve got the chance to let someone else farm some of that territory, you should.

    If we were Emperor of Pharma (or if we were merely responsive to shareholders’ growing concerns that we were maximizing their research investment – or at least making it repay its cost of capital, which it most probably isn’t) we’d get cracking on figuring out which companies might, in exchange for downstream product rights or perhaps some other valuable trinket, be interested in playing with our discovery toolkit. Might not be too radical, for example, for GlaxoSmithKline to maybe open up a sirtuin target or two to Pfizer (whom we understand though cannot confirm made a last-minute bid for Sirtris). Or maybe Bristol-Myers Squibb could more profitably exploit its adnectin platform, acquired with Adnexus, by letting someone else take a crack at it.

    Keeping their new technologies to themselves, GSK, Bristol and Merck aren’t going to get a dime back on these early-stage investments for years – in the best case. Maybe never. Seems to us the more sensible approach would be to structure some out-partnering deals that increase the likelihood that something will come out of these technologies, and, as Alnylam has done, secure a share of any lucky results.
    image from flickr user furiousgeorge81 used under a creative commons license.

    Thursday, June 19, 2008

    Nothing to Lose but Your Chains: Out-Partnering Part I

    Lots of interest in out-partnering these days from Big Pharma – out-licensing, spin-offs, project financing (see in particular this IN VIVO analysis of Pfizer’s out-partnering strategy).

    But let’s eliminate a myth now. Out-partnering won’t raise lots of money for Big Pharma, even by selling tail-end products. Lilly’s entire out-licensing program –the industry’s most lucrative because it is the only one to exploit tail-end drugs- raised about $1 billion over 7-8 years. Now, that’s hardly chump change. But it doesn’t really move the needle when a moderate annual Big Pharma R&D budget is pushing $3 billion.

    So if companies are going to get into serious out-partnering, the other reasons ought to be pretty compelling.

    They are. Out-partnering frees up scarce resources to put behind other projects by off-loading some expenses. It can force companies to do some salutary comparisons between internal and external projects (would your same-mechanism Phase II program fetch the price your competitor just paid for Way-Cool Biotech’s?)

    But we’re going to talk, here and in a post for tomorrow, about other reasons to out-partner. Starting with a relatively dramatic rationale: using out-partnering to remake the business model.

    As some smart types from Boston Consulting Group write in the current IN VIVO: “The decline of pharma’s traditional model isn’t imminent; in fact it already happened.”

    The consultants go on to tick-off depressing metrics like total shareholder returns. Pharma's return is down 0.3% annually since 2000. Compare that to, say, the exciting auto components sector – up 6.5% over the same period. They argue that drug companies, to get back on any kind of growth track, need to respond with more than the current set of stock tactical answers (portfolio rationalizations, sales-force restructurings, productivity enhancements, pipeline accelerations, more aggressive dealmaking, and especially big M&A).

    So how to do this? The consultants propose a fairly intensive internal process, which seems OK to us. But, closet revolutionaries that we are, we’d suggest an alternative route: out-partnering force majeure.

    Take the out-licensing of tail-end products. Comparatively small potatoes, as we noted. But let’s say Pfizer were to re-define tail products, taking all primary-care products whose patents were expiring in four years or less (among them, Lipitor, Detrol and Viagra) and spin them out into a public company – call it Pflipitor.

    Start financially. Our bet is that investors would be very interested in such a company – something that looks a bit like Forest Labs – minimal R&D expense, intense commercial focus, primary care without the Big R risk, aggressive late-stage in-licensing. And while Pfizer would lose the cash flow, it would have, in its Pflipitor shareholdings, a nice bank account to dip into when needed. And just maybe those Pflipitor shares would actually gain in value over time.

    And to be clear: Pfizer shareholders already know the company can’t possibly fill the revenue hole the company has dug for itself (that dead elephant in Pfizer’s boardroom – as well as the boardrooms of plenty of its competitors – is the reason Pfizer’s PE sits below sea level). Spinning out the tail products makes filling that hole somebody else’s problem, and that somebody else will be far more capable, structurally and our guess is strategically, of solving it.

    Meanwhile, Pfizer can focus on actually growing a much smaller company. If you remove those four "tail" products, it’s possible to grow at double-digit rates.

    And not just because Pfizer's base is smaller. Pflipitor would take with it a whole lot of Pfizer’s overinfrastructured commercial organization, allowing Pfizer to more rapidly switch over to the flexible, partly outsourced, specialty-intensive sales model it theoretically wants to embrace.

    There would be other big changes. Pfizer would no longer have the cash flow to support the enormous R&D organization it now carries around like the chains on Marley’s ghost, making it far more pressing to strip out programs that can’t prove substantial advantages over outside, in-licensable competitors. Instead, like a biotech, Pfizer would have to sell equity – pieces of its share of Pflipitor, perhaps – to finance R&D…further incentivizing its R&D execs to cast a cold eye on internal research programs.

    Yes, we know: this sounds a bit like throwing the kid into the deep end to teach him to swim. But the drug industry already knows how to swim, we believe. The problem is it's trying to swim while loaded down with chains. Either we’ve got to cut them or get out of the pool altogether.

    Image from flickr user foxypar4 used under a creative commons license.

    Wednesday, June 18, 2008

    Horse Trading on Six Protected Classes?

    Section 176. That's the section of Senate Finance Committee Chairman Max Baucus' Medicare package that really caught our attention. The section, titled "Formulary Requirements with Respect to Certain Categories and Classes of Drugs," refers to the six "protected" drug classes.

    One of the more controversial provisions of the Medicare Part D prescription drug benefit was the creation of six "protected" classes. Under the program, plan sponsors must cover "all or substantially all" drugs in six categories: antipsychotics, antidepressants, antiretrovirals, immunosuppressants, anticonvulsants and antineoplastics.

    If you're Eli Lilly (Zyprexa) or Bristol-Myers Squibb (Abilify), for example, you don't have to be concerned about whether your drugs will be on a Part D plan formulary-they have to be. To read more on this, click here.

    But the protections weren't actually written into law; the provision was enacted through subregulatory guidance, which means the Centers for Medicare & Medicaid Services can change the practice at any time.

    Section 176 changes all that. Under the Baucus proposal, the guidance would be codified into law, making the provision permanent. The law could be amended but would require rulemaking-a much longer and more onerous process than under the current set-up.

    How did that get into the Medicare package? After all, we heard repeatedly that anything judged to be overly controversial would be left out of the must-pass legislation, which includes the physician payment fix.

    According to Congressional staffers, Section 176 was added to the bill after hearing it from patient groups. Specifically, staff were lobbied by the Access to Critical Medications Coalition, a collection of advocacy groups which includes: the AIDS Institute, American Academy of HIV Medicine, American Academy of Neurology, American Psychiatric Association, Cancer Leadership Council, Epilepsy Foundation, HIV Medicine Association, Mental Health America, National Alliance for the Mentally Ill, National Alliance of State & Territorial AIDS Directors, National Kidney Foundation, Project Inform and the TEN Project.

    But there must be more to it than that. During a January 2007 Senate Finance Committee hearing on the Part D benefit, the Democrats' first on price negotiation since taking the majority in the mid-term elections, lifting some protections on the six drug classes were cited time and again by expert witnesses as the first logical steps in reducing costs of the program.

    So why is Baucus doing the exact opposite and making the protections more permanent? One theory we have at The RPM Report is inclusion of Section 176 was in exchange for industry support of the Senate's (specifically Finance Committee ranking Iowa Republican Chuck Grassley) Physician Payment Sunshine Act, which requires public disclosure of marketing relationships between drug companies and doctors. To read our take on Sunshine, click here.

    The argument against that theory is that the six "protected" classes provision is absent from Grassley's Republican alternative to the Baucus package. We're going to monitor the progress of Section 176 but we'd love to hear any theories or insider knowledge on how it made it into the Baucus bill. Just email us.

    Baucus is huddling today with House leadership on a stripped down version of the Medicare package and says legislation will make it through by the fourth of July. Whether the provision makes it into Baucus version 2.0 will be an indicator of how hard patient groups and drug companies are lobbying for it behind the scenes.