Wednesday, August 27, 2008

Miscommunicating Risk (Part 2): The Byetta Disconnect Continues...

Byetta's back in the news, and once again not in a good way. "Amylin Reports Four Additional Deaths With Byetta" is how Reuters has it.

As we wrote last week, the Byetta experience underscores some fundamental challenges facing the industry (and investors) in the new era of drug safety. This is a case where there seems to be a big disconnect between the seriousness of a safety issue from the regulatory perspective (where a safety "update" by FDA treated two deaths from pancreatitis as important information for prescribers, but not a call to action) compared to the reaction of investors ("The sky is falling!").

But, whether or not FDA intended to sound the alarm about Byetta, the stock market reaction made pancreatitis a big story. Or, put another way, the sky may not be falling but Amylin's stock price certainly did.

Now, a week after the news broke, Amylin tried its hand at communicating safety information, hosting a teleconference to offer "context" for the FDA safety update.

That included the news of four additional case reports of Byetta patients who experienced pancreatitis and died. For analysts on the call, though, that "news "sounded like a non-event. Amylin carefully explained that those four deaths, though all associated with pancreatitis, were already reported to FDA, before the agency issued its recent safety "update" on the GLP-1 anti-diabetic. In other words, the agency agreed with the sponsor that they weren't worth talking about publicly. In three of the four cases, Amylin says, it has obtained case reports that support the view that the cause of death was unrelated to pancreatitis or Byetta. In the fourth case, Amylin says it has been unable to obtain any additional information.

Amylin also discussed the deaths in the broader context of outlining the overall risk of pancreatitis seen with Byetta (about 1 in 3,000) and the more severe hemmorhagic/necrotizing pancreatitis that triggered the latest alert (less than 1 in 10,000). And, the company says, there is no indication whatsoever that the rate of pancreatitis associated with Byetta is any higher than the expected rate in the overall patient population.

Well, Amylin shares are down again today (as are marketing partner Lilly's).

This raises two more questions in our minds for others in industry to ponder as the new drug safety era takes shape.

(1) FDA recognizes that it needs to do better when it comes to risk communication. But do sponsors?
(2) In a world where the line between partner and prey (cf. Roche/Genentech, Bristol/ImClone) is always fuzzy at best, how does "Safety First" volatility affect the stability of partnerships?

Amylin's investors haven't been shy about voicing their feelings that FDA is being unduly alarmist about the pancreatitis issue. (And, privately, we've heard the same thing from executives who work for the sponsors.) But this is a case where FDA issued safety information in about the least alarmist way it could have--short of keeping its mouth shut.

And if you think keeping its mouth shut is an option for FDA right now, you haven't been paying attention.

But what about the sponsors? The question that begs to be asked is why Lilly and Amylin waited a week to hold a conference call. Analysts who put that question to Amylin say the answer was that the company didn't want to upset FDA by appearing to challenge or contradict its safety communication. (And in holding the call at last Amylin carefully avoid doing so.)

Our response to that objection is: what would an angry FDA do that is worse than what is already happening to Amylin? The stock was down 20% and investors are starting to write off hopes for Byetta LAR.

Still, if Amylin and Lilly were afraid of annoying FDA, then why hold a call at all? The delay made the issue seem ominous. Just the scheduling of the call caused Amylin shares to fall. Then the company said very little that isn't already in the public domain about the context of pancreatitis--and apparently by failing to offer anything new its reward is to see another stock price decline.

We don't claim to know the right way to manage investor communications about these kind of emerging safety issues, but we're pretty sure this isn't it.

What we do know is that sponsors have to prepare now for how they are going to handle a circumstance like this. Amylin and Lilly may have been caught flat-footed by the reaction to the FDA safety notice, but that is no excuse. In today's world, the news could just as easily have been sparked by an international regulator, or by a prominent academic (say, Steve Nissen has been quiet lately hasn't he?), or in the favorite phrase of former FDA deputy commissioner Scott Gottlieb, by any 18 year old with a computer and access to Wellpoint's database.

Our modest proposal for a better way: why not hold this conference call before FDA issues a safety update? It would take a brave sponsor to do that -- in effect announce to investors that it has submitted six fatality reports to FDA. Still, in hindsight, we bet Lilly and Amylin would be better off right now if that was the approach they took.

Which leads into the second issue, since an effective communication strategy presumes that the two sponsors have the same objectives in mind.

Viewed from the standpoint of the Byetta brand team, there is no doubt that the partners' interests are aligned and this safety scare is a huge problem.

But what about from a strategic perspective? The Roche/Genentech deal has already triggered speculation about other biotech buyouts to come, and Lilly/Amylin is on everyone's list of possibilities. Lilly, remember, already showed its willingness to go down this path when it bought its Cialis partner Icos.

If the market is overreacting to the pancreatitis issue, Lilly can do more than just assert its confidence. It can put its money where its mouth is and buy Amylin out. It wouldn't be cheap: Amylin is valued at just under $3 billion. But that is less than half its value a year ago before the pancreatitis issue first emerged.

Then there is this: a new posting on showing that Lilly is moving its own GLP-1 agent into Phase III. That certainly got investors' attention. Does Lilly think it has a better product than Byetta?

(Lilly may even have an extra incentive to buy Amylin: according to our Strategic Transactions database, the Byetta contract includes "option compounds" in both Lilly's and Amylin's pipelines to which the partners have reciprocal rights. While the names of the compounds and the option periods have been redacted out, our bet is that the "option compounds" represent possible competitors to Byetta. So if Amylin has got any claims to Lilly drugs -- maybe indeed this Lilly-discovered GLP-1 -- then Lilly would have some extra incentive to buy out Amylin now).

We don't pretend to know Lilly's plans for its Amylin partnership, but we do know that the challenges of mastering risk communication aren't any easier when there are two sponsors involved.


Anonymous said...

The media has no accountability for its actions...this is wrong and it allows them to make $$ without providing complete information to consumers and investors. Their intent is clear....make money from selling that by scaring the American public to death....and if a mistake is made or data is presented out of context then print/televise a retraction where it won't be noted or understood. Meanwhile, sell more advertising due to increased ratings. Katie Couric with an earpiece and a teleprompter has more creditability than a physician with decades of training. What's wrong with that?

Michael McCaughan said...

Thank-you for the comment. I think your last sentence is a crucial observation--it is true that Katie Couric is one of a very long list of people who have much more impact on how drugs are actually used in this country than the Food & Drug Administration, at least in the context of safety issues. I know FDA is at least aware of that fact and trying different ways to adjust to that reality. Based on Byetta, I'm not convinced sponsors or investors are at that point yet.

Anonymous said...

Dear Michael,
Thank you for another interesting article. It’s basically dammed if you do and dammed if you don’t. I would only like to point out that contrary to the ICOS acquisition, Lilly cannot unilaterally buy Amylin. According to section 14.1 of the Collaboration Agreement, the parties agreed to a “standstill” and Lilly agreed that it will not in any way or form own more than 10% of the outstanding common stock of Amylin. ICOS didn’t have such a standstill in the Cialis agreement. This information is publically available in your database and on the SEC website.