Friday, October 31, 2008

Deals of the Week Loves A Parade

Have you heard? There's a parade in Philadelphia today. Maybe it's going on as you're reading this (streaming video feed here)! How about that?

Beyond the obvious occasion of the Philadelphia Phillies' World Series victory (woooo hoooo!) there are other reasons for a parade, you see. You mightn't have noticed, but today is DOTW's first birthday. Much thanks goes to Ellen Licking whose keen and often lovingly acerbic observations fill this space most weeks.

Which reminds us to make a programming note: we'll be stretching the format a bit in the coming weeks and introducing you to our Deals of the Year Top Ten Countdown. (We hear World Series MVP Cole Hamels did last night's Top Ten on Letterman, BTW. Just sayin'.) Got any favorites? Make your case in the comments!

Oh yeah, and it's Hallowe'en!

We're going to skip the weekly wrap-up this week--at the moment we have a bit of a one-track mind. But never fear: we won't go all Bud-Selig on you and suspend this post two-thirds of the way through. Just like Brad Lidge (video), there's no stopping your weekly Closer. Forthwith, a parade of deals unlike any others, for they are:

Clinical Data/Avalon: Biomarker aggregator Clinical Data continued its acquisition spree this week (the week the Phillies won the World Series), snapping up Avalon Pharmaceuticals’ biomarker discovery capabilities and a pipeline of potential oncology compounds for $10 million in stock. The transaction also included a private placement of Avalon stock, a $3 million term loan to Avalon, and an exclusive license to its biomarker platform. For struggling Avalon, the deal is a bailout that will allow it to continue development of its therapeutics, including drug discovery partnerships with Merck and Novartis. For Clinical Data, the deal is part of its ongoing plan to develop and acquire key biomarkers of drug response, to enhance its bargaining position with potential drug development collaborators and as an in-licenser. We discussed their strategy in an IN VIVO feature story on biomarkers for psychiatric drugs in July, when we focused on Clinical Data’s Phase III drug vilazodone, which it acquired from Merck KGAA via the acquisition of Genaissance Pharmaceuticals in 2005. Shortly after that story ran, Clinical Data bought Adenosine Therapeutics in an $11 million cash deal that also included issuance of $25.2 million in promissory notes. Adenosine brought it preclinical drug candidates in cardiology, diabetes, inflammatory diseases, and sickle cell anemia, around which it expects to use its biomarker expertise to target likely responders, and Stedivaze (apadenoson), an experimental adenosine-based stress agent for myocardial perfusion imaging. These deals, along with earlier pick-ups of biomarker developers Epidauros, Genaissance, and Icoria, reflect the opportunistic attitude of Clinical Data’s chairman, Randal Kirk, which has transformed the company over the past three years. It also shows that with biotech assets available on the cheap these days, even for smaller companies, if they’re willing to spend their cash or are in a position to extend short-term credit, it’s a good time to be identifying opportunities.--Mark L. Ratner

GSK/Genelabs: GlaxoSmithKline PLC said on Thursday (the day after the Phillies won the World Series) it was acquiring the hepatitis-focused infectious disease play Genelabs Technologies for $1.30/share, approximately $57 million. The deal, by GSK's infectious diseases CEDD, brings the Big Pharma a bunch of HCV-focused assets in research, lead, and preclinical stages. GSK already has rights to Genelabs Phase II Hep E vaccine, which was in-licensed by then-SmithKline Beecham waaay back in 1992. A Phase III SLE candidate, Prestara, has been in development since the early/mid '90s; Genelabs received an FDA approvable letter for the candidate in 2002 and two Phase III trials later the company had been looking for a development partner to conduct further clinical work. That the companies' release doesn't mention Prestara probably shouldn't therefore be a surprise. GSK instead heralds Genelabs' early stage work in HCV, which will give it a drug discovery platform in this hot therapeutic space.

Merck-Serono/Theratechnologies: Canadian biotech Theratechnologies said on Wednesday (the day the Phillies won the World Series) that it licensed to Merck-Serono US rights to tesamorelin, a Phase III treatment of excess abdominal fat in HIV patients with lipodystrophy. Theratechnologies will receive a license fee of $22 million, an equity investment of $8 million (at C$4.73/share, a 130% premium on the previous day's close) plus milestone payments and a royalty on net US sales. Theratechnologies will continue to develop tesamorelin for additional indications, which M-S has the right to option (and thus pay equal development costs). Theratechnologies holds an option to co-promote tesamorelin in additional indications. Merck-Serono has a bit of history in HIV-related lipodystrophy, though not the particularly good kind. In 2003 then-Serono paid the US Justice Department a whopping $704 million in a settlement related to the company's alleged illegal promotion (in lipodystrophy and other areas) of its human growth hormone Serostim, which is approved for HIV-related cachexia.

Cephalon/Acusphere: Expect to hear about more deals like this one that escaped us last week (the week before, well, you know): cash-desperate Acusphere, a drug delivery specialist, granted Cephalon an option to license its ultrasound contrast agent Imagify, which is awaiting an FDA decision next February, as well as an exclusive WW license to its preclinical injectible version of celecoxib, AI-525. (The Pink Sheet Daily's coverage of the deal is here.) Essentially a complex deal boils down to this: Acusphere gets $20 million from Cephalon upfront (comprising a $15mm senior secured convertible note and $5mm cash for AI-525) so it doesn't go bust before FDA weighs in on Imagify, and Cephalon gets a very good price on a product candidate that--if it had to wait until post-approval or post-Advisory Committee (which is scheduled for December 10th), would certainly be a lot more expensive. If Cephalon exercises its option, that triggers a $40mm payment to Acusphere upon approval and a double-digit royalty on net sales.

Celgene/MethylGene: The rising tide of Philly baseball supremacy couldn't lift all ships this week. Call this the honorary Tampa Bay Devil Rays no-deal of the week. Montreal-based MethylGene has fallen on hard times now that Celgene has decided to pull out of a 2006 licensing agreement with the biotech. (That deal was originally inked by Pharmion, which was acquired by Celgene in late 2007.) As a result of the decision MethylGene will halt basic research, layoff about half its employees, and focus its resources on its three lead drug candidates: MGCD0103, '290, and '265. '0103, the lead project in the Pharmion/Celgene collaboration, has been under a clinical hold since August, when the company reported 19 instances of pericarditis or pericardial effusion in trials of the HDAC inhibitor. MethylGene is confident it can convince FDA to lift the hold, though it has not yet met with FDA to do so. The Pink Sheet Daily's coverage of the deal is here.

image: philadelphia inquirer/Michael Perez

Wednesday, October 29, 2008

ZymoGenetics' Atacicept and the Risks of Biologics

ZymoGenetics just lost any hope for a fast filing for atacicept.

As reported last week, Merck Serono, ZymoGenetics’ partner on the autoimmune disease candidate, is discontinuing development in lupus nephritis due to an increased risk of infection.

ZymoGenetics had hoped an accelerated filing for atacicept could be based on Phase II/III data in lupus nephritis and systemic lupus erythematosus, but the safety signal throws a wrench into those carefully laid plans.

As Oppenheimer analysts Kevin DeGeeter and Christopher Holterhoff predict in an October 27 research note, it’s more likely that FDA will ask for full Phase III studies for atacicept, throwing up an unexpected roadblock to approval—and pushing back the timing for a US launch until 2014 at the earliest.

Even if approved, the news has significant commercial implications for ZymoGenetics. An important rationale for atacicept is the expected safety benefit compared to anti-CD20 drugs such as Rituxan. As DeGeeter and Christopher Holterhoff point out, an increased risk for infections may limit the commercial appeal of atacicept in rheumatoid arthritis and multiple sclerosis (both of which are in Phase II studies).

Given the way things are heading these days, it’s a pretty safe bet that FDA won’t look too kindly on a fast track filing for a large molecule with a serious risk of infection. And FDA has all the more reason to be extra cautious, based on a study on biologics safety published in the Journal of the American Medical Association.

The findings aren’t pretty: the probability of a biologic having a safety-related regulatory action is 14% within three years of approval, and 29% within 10 years of approval, Thijs J. Giezen et al. found. Those “safety-related actions” can range from a letter to health care providers about a new safety signal to a black box warning in labeling to a market withdrawal.

When that study is compared to similar studies with small molecules, it’s even more dismal for biologics manufacturers: a study published in JAMA in 2002 found that new chemical entities approved until 1999 had a probability of a black box warning of 10% after 10 years of marketing, compared with the 17% found in the Giezen study.

Whether those kind of studies put pressure on FDA to be more cautious when it comes to large molecule development is anyone’s guess. As we've argued before, FDA's Risk Evaluation & Minimization Strategies should give the agency the confidence to approve products it otherwise might not. But those data certainly don't instill confidence in the regulatory system for biologics.

For individual products like ZymoGenetics’ atacicept, the fall-out is the potential loss of an accelerated BLA filing. But given that many large pharma companies are in the midst of giving themselves an Extreme Biotech Makeover, the JAMA study may give some companies pause. There's no doubt biotech is a risky investment; but Giezen et al. put the safety risk in black and white.

Forest Bucks the Trend With Diabetes Deal

Its not often that you see a deal that runs exactly contrary to what looks like an industry-wide trend. But Forest’s $340 mil. deal with Phenomix fits that bill.

Big Pharma business development executives around the industry are saying the same thing: evolving regulatory requirements make type 2 diabetes medicines a far less attractive investment opportunity than they once were.

The assumption is that new drugs—especially ones in established classes—will need expensive outcomes studies, potentially before approval, and may even face a de facto comparative efficacy standard to reach the market.

And the data so far in 2008 show an unmistakable trend: deals are still happening, but at very low valuations. (You can read more in The RPM Report. Non-subscribers can sign up here for a free trial and read the analysis right away.)

Clearly, commercial companies have taken money off the table when it comes to diabetes deals.

Well, not so fast.

With one stroke of the pen, Forest increased the up-front dollars spent on diabetes projects across the industry so far in 2008 by a factor of 10: $75 million versus $7 million so far this year. And it did so by acquiring exactly the type of compound—a late entrant in an existing class of oral antidiabetics—where the perceived regulatory risk is highest. Specifically, the deal gives Forest rights to Phenomix’ Phase II DPP-4 inhibitor dutogliptin. (You can read all about the deal itself in “The Pink Sheet” DAILY.)

In fact, here as how Lilly SVP-corporate strategy & policy Gino Santini summarized the climate for drug development in type 2 diabetes during FDC-Windhover’s Pharmaceutical Strategic Alliances conference: “Being the fourth or fifth projected DPP-4 is not as attractive as it would have been probably several months ago.”

To be fair, dutogliptin could be the second entrant in the DPP-4 class, but only if Takeda’s alogliptin and Bristol/AZ’s saxagliptin stay stuck at FDA—and Novartis is unable to revive its DPP-4 vildagliptin. And even if dutogliptin ends up as the second entrant, even the best case scenario would have it entering five years behind Merck’s sitagliptin (Januvia).

So what does Forest know that no one else does?

One possibility is that the company just hasn’t been paying attention. Certainly, the perception of some biz dev execs is that companies that aren’t in the diabetes class don’t fully understand the evolving regulatory climate.

But that doesn’t seem likely in this case. After all, Forest does have products in other categories—like cardiovascular medicines and depression—where it has ample opportunities to learn first-hand the realities of dealing with today’s FDA. Indeed, the company’s quarterly call included discussion of a missed user fee deadline for the pending fibromyalgia therapy milnaciprin, as well as discussion of expectations for regulatory requirements in other classes.

And we were struck in particular by Forest Chief Operating Officer Larry Olanoff’s response to a question about whether FDA would ask for comparative data to support approval of the COPD therapy aclidinium.

“The FDA by law, is not supposed to be comparing one product to another, in terms of making their determination of approval,” Olanoff noted. That said, “we have what we believe to be a very well tolerated product and the data thus far is not revealing any safety signals so having another even if you wanted to take a hard-nosed view and having an adequate efficacy picture is one that the agency would be I think compelled to review it and consider for approval.”

But he didn’t stop there. “Going beyond that, though, we would never launch a product if we didn't think it had clear commercial value and ability to compete.”

Another questioner asked specifically about Forest’s plans for the antipsychotic drug cariprazine, in light of FDA’s recent rejection of Vanda’s iloperidone. “I think it is clear the division wanted an active comparator,” the questioner said.

“You make a good point,” CFO Frank Perier replied. “I don't know if it is that is the only reason the drug wasn't approved. I can't comment further on that. What I can tell you is that having active comparators in a program like this is always a good consideration just for purposes of coming in with some competitive data, so it is a serious consideration for us in terms of design of our programs both in Phase II and potentially in later phases.”

Clearly, Forest has been paying attention. So why go after a DPP-4 inhibitor in this climate?

The answer, most likely, is that Forest is just sticking to what has worked in the past: making me too drugs pay off at a rate that Big Pharma doesn’t see or can’t deliver on. Its not like there weren’t other companies that looked better prepared to sell Celexa or Lexapro—it is just that Forest saw (and delivered on) a larger opening for a late entrant in the SSRI class than other companies did.

Forest also persevered on the beta blocker nebivolol (Bystolic), the 20th entrant in that class and a product with a long marketing history overseas. Bystolic isn’t setting any records: Quarterly sales were $14.2 million in its third quarter on the market. But then again, it is already tracking ahead of Novartis’ first-in-class renin inhibitor Tekturna (which rang up $40 million in sales globally during its sixth full quarter on the market.)

Given Forest’s track record, we’re not going to bet against it making dutogliptin pay off.

But we also believe the Big Pharma execs who no longer see the same value in projects like dutogliptin that they might have five years ago.

So it really comes down to different expectations. Forest is clearly happy to take on opportunities that simply no longer interest the Lillys of the world. Which only begs the question: where will Big Pharma find the diabetes projects that do meet its business case demands?

Tuesday, October 28, 2008

FDA Has a New Guard Dog: He’s a Wolfe

The election is near and Washington is rife with chatter about who will go where in the next administration.

But FDA made a Washington appointment in early August that will have as much (if not more) impact on many drug sponsors for the next four years than many of the more visible and high-profile appointments expected in the health field.

On August 8, FDA made long-time consumer advocate and pharma gadfly Sidney Wolfe (above) a permanent four-year member of the Drug Safety & Risk Management Advisory Committee. His term began August 8 and lasts through May 31, 2012. The information was only recently posted publicly by the agency.

Wolfe has headed Public Citizen's Health Research Group for 36 years. There are only a handful of products during that period with safety issues, where the issues were not brought to the public attention by Wolfe. He earned a MacArthur genius award in 1990 acknowledging his ability to use the political/media/regulatory system to question the safety and use of pharmaceuticals.

How much impact can one person have on an advisory committee ?

Ask Cephalon, which faced Wolfe at a May advisory committee looking into an expanded indication for Fentora. What the sponsor hoped would turn into an important expanded use for the product turned instead into an inquisition about how the company had lost control of a drug of abuse in the marketplace. Far from getting an expanded indication, the sponsor faces the task of showing FDA that it can cut back existing use in the market.

Wolfe played a significant role in setting the tone and timber of the Fentora advisory committee. He urged FDA to use its new post-market control powers to increase control of use of the drug for approved patient populations.

Cephalon did not know that Wolfe would be part of that review until three days before the meeting was scheduled. He was an unpleasant surprise for the sponsor. It might not be much better for companies prepared for sessions with him; and, at least five sponsors have upcoming dates with him in the next two months.

Pain Therapeutics and Alpharma have opioid pain management products (Remoxy RT and Embeda) scheduled for a joint meeting of the Anesthetic & Life Support Advisory Committee and Drug Safety & Risk Management Advisory Committee on Nov. 13-14. That meeting could be a reprise of the Fentora meeting and offers the advisory committee a further opportunity to encourage FDA to move toward tougher post-market controls on abusable pain management products. It could help set the tone for the post-market for the wide range of pain drugs and formulations in development.

In December, the drug safety advisory committee will be meeting with the Pulmonary Drugs Advisory Committee and the Pediatric Drugs Advisory Committee on a class of products that reaches a much wider patient population: asthmatics using beta agonist inhalers. The advisory committees have two days set aside for discussion of the safety of long acting beta-2 agonists (salmeterol and formeterol). The ingredients appear in a number of major products (Serevent, Advair, Symbicort and Foradil) from GSK, AstraZeneca and Novartis.

From his advisory committee post, Wolfe will be able to push for more active post-marketing monitoring and control programs across the broad gamut of drug classes. FDA calls in the drug safety committee for joint meetings across drug classes. Wolfe won't be restricted to any narrow single class of product.

That leads to one final thought about where he may be asked to offer his opinions in the near future. Wolfe's resume shows an early interest in the cellular mechanisms of blood clotting. It will be interesting to see if FDA asks either the drug safety committee or Wolfe as a visiting advisory committee member to bring that knowledge to upcoming reviews as new anti-clotting compounds come up for approval .

Eli Lilly better hope that, if there is an advisory committee for prasugrel next February, FDA does not turn loose its new Wolfe.

Monday, October 27, 2008

Heroes, Prophets and Presidential Candidates

Add candidates Obama and McCain to the national autism discussion. And, with that, add an unsettling note for vaccines during the next four years.

Earlier this month, we wrote about praise from an unusual quarter for Congressman Henry Waxman (D-CA). An American Enterprise Institute scholar called the Democrat a “hero” in the effort to reassure the country about the safety of childhood vaccines. Waxman was praised at a book review event for a new work tracing the history and misdirected arguments from the evangelists of a perceived new epidemic of autism (“Autism’s False Prophets,” Paul Offit).

Then, as a perfect example of how politically potent the subject of autism has become, the subject was raised by both candidates in the final presidential debate on Oct. 15.

Republican candidate McCain, who has previously suggested support for those arguing that a link exists between vaccines and autism, raised the issue first in the Oct. 15 debate. McCain discussed autism in relation to his choice of Sarah Palin as a running mate.

Palin “understands special-needs families,” McCain declared. “She understands that autism is on the rise, that we’ve got to find out what’s causing it, and we have to reach out to these families, and help them, and give them the help that they need as they raise these very special needs children.” [Note: Perceptive fact-checkers quickly clarified Palin’s familial relationship to the issue: she has a nephew who has autism.]

Not to cede the issue of caring about autism to his opponent, Obama jumped in when asked for a response on Palin’s qualifications: “I think it’s very commendable the work she’s done on behalf of special needs. I agree with that.”

But Obama said that McCain’s stated plan to freeze federal spending would make it impossible to conduct further work on autism research. “I do want to just point out that autism, for example, or other special needs will require some additional funding, if we’re going to get serious in terms of research.”

McCain returned to the subject of autism forty minutes later in the debate in a section on funding for education. He said again that vice-presidential candidate Palin “knows about” special educational needs and autism “better than most.” The Republican candidate promised that “we’ll find and we’ll spend the money, research, to find the cause of autism.”

As sensitive barometers of the hot political/social issues, the candidates confirm the potency of attention to autism. Both candidates are primed to pay attention to the disease from the White House. But because of the lingering public misperception of a link between vaccines, the political statements represent a discordant note for the public health effort and for the vaccine community from the upcoming election.

The “further research” approach to autism in the third debate, however, is an improvement, from the vaccine community’s point of view, over earlier references to concern about a relationship between the condition and vaccinations.

One current legislative push, under the sponsorship, of Manhattan Democrat Carolyn Maloney would require the National Institutes of Health to conduct comparative trials of vaccinated versus unvaccinated populations “to study and resolve the question of the possible link between thimerosal in vaccines and autism.”

A definite answer from a controlled clinical trial: that sounds like the best way to put lingering questions about the safety of vaccines to rest. But it is not as easy as it sounds.

George Washington University anthropologist and international affairs professor Roy Richard Grinker has devoted close attention to the issues of prevalence and incidence rates of autism. A father of an autistic daughter, in 2007, he wrote “Unstrange Minds: Remapping the World of Autism.

Grinker questions the fundamental assumption that there is an epidemic of autism. He maintains that the perceived change in prevalence rates in autism that is driving the public attention is not really a change in rates but stems from changes in diagnostic criteria and methods and an increase in the numbers of childhood psychologists doctors. He told an American Enterprise Institute event on autism on October 11 that comparing historic prevalence rates of autism to current rates is not comparing “apples to oranges,” it is more like comparing “apples to automobiles.”

Grinker also says that it will be very difficult, if not ethically impossible, to compare vaccinated versus unvaccinated populations. Some of the groups suggested as the unvaccinated arms are not unvaccinated.

“There is a myth out there that the Amish are unvaccinated,” Grinker says. “That is not the case: the Amish are vaccinated, probably at a rate similar to African-American communities in urban areas.” He noted that the population of unvaccinated children tends to be children with other issues (such as compromised immune systems) which will make them difficult to study.

The promise of more studies sounds good in a political campaign. Autism studies may even develop into a health priority during the next budget-strapped years. If Grinker is correct, however, the practical issues surrounding those studies will make them much harder to perform than to promise.

Wacky World of Generics: Treximet Edition

That was fast! Just six months after (finally) winning approval for its first product, Pozen announced that an application for a generic version of the sumatriptin/naproxen migraine combo (Treximet) has been filed at FDA.

Par Pharmaceuticals filed the generic application and notified Pozen and its partner GSK (now the NDA holder for the drug) that it is challenging the patents on Treximet and seeking to market a generic version as soon as Treximet’s data exclusivity expires. Under US law, Pozen is guaranteed three years of exclusivity on Treximet, and it expects an additional six months of exclusivity to be awarded once pediatric studies are complete.

So the earliest Par’s generic could launch is October 2011.

That doesn’t seem so far away—especially since the Treximet application was first filed at FDA in August 2005 and not approved until April 2008. In other words, the commercial lifespan of Pozen’s first product could end up being only 10 months longer than the review of the application by FDA.

We have written before about the regulatory and reimbursement challenges facing new formulations like Treximet. (For an update on another case study in that area, see Nitromed’s recent sale of Bidil to JHP Pharmaceuticals. Or, for that matter, look at what else Pozen had to talk about on the conference call: a potential change in the proposed endpoint for a new NSAID formulation partnered with AstraZeneca.)

Add another item to the list of why these seemingly “low-risk” R&D projects are anything but: the relatively short commercial lifespans for those products lucky enough to make it to market and secure reasonable payment.

Now, this isn’t exactly news: everyone knows the ground rules for exclusivity for new formulations. As Pozen CEO John Plachetka told investors on an Oct. 17 conference call, “we expected such an action by one or more generic companies” and “we have a plan in place to deal with this.”

The first step in that plan, no doubt, will be a lawsuit to enforce the patents. In theory, should Pozen and GSK prevail, they would be protected from generic competition as late as 2025. But if history is any guide, patents on new formulation or drug delivery technology generally have not been broad enough to block generics from designing around them, sooner or later.

Regardless, it sure seems awfully early to be talking about the end of Treximet’s exclusivity, since the product is barely even getting started in the marketplace.

Plachetka noted that unbranded direct-to-consumer ads only began to air around Labor Day, and September script data show strong growth. Branded DTC ads are now starting in some markets he added, so “we expect the trend to continue to get better as the DTC starts to hit.”

Even there, Pozen is paying the price for the changes in the regulatory climate. GlaxoSmithKline says it took three months for FDA to review its proposed DTC ads for Treximet. “We just lost some time in terms of FDA giving us approval,” GSK CEO Andrew Witty said during an investor call Oct. 22. “We now have all of that. We've got very good reaction in the marketplace, and I'm not worried about Treximet.”

Though pre-review by FDA is voluntary, in the current climate it is really more of a necessity. (We explain here why pre-review is the smartest thing a company can do with its DTC—except perhaps not run TV ads at all.) For FDA, though, Congress has sent a clear message: pre-reviewing ads is nice, but they want to see more enforcement. And, as “The Pink Sheet” reports here, that is precisely what Congress is getting. So sponsors shouldn’t expect speedy reviews of those DTC campaigns for the foreseeable future.

All of which begs the question: what, exactly, will GSK really get from Treximet?

The product is supposed to extend the lifecycle of the Imitrex franchise, facing its own patent cliff early next year (February 2009). That gives GSK less than one year to establish Treximet in the marketplace—and then the possibility that it loses the product just over two years later.

Treximet may be a highly effective migraine treatment, but it sure seems fair to ask whether it is worth the headaches for GSK…

While You Were Homering

There were nine home runs hit at Citizen's Bank Park this weekend--seven by the good guys and three of those courtesy of the man pictured above. The Fightin's took games three and four to take a 3-1 Series lead and game five is tonight at the Bank. One more. Please?

We know you come here for more than just baseball coverage on Monday morning (yes, the Eagles and Flyers also won), and there was plenty of action on the drug development front at both ICAAC and ACR. We'll unpack some of it below, in your weekly roundup of weekend events that happened on the weekend this week that weren't sports-related.

While you were crossing your fingers ...

  • The news out of the joint Infectious Disease Society of America/Interscience Conference on Antimicrobial Agents and Chemotherapy is coming thick and fast. Just a taste: data from Rib-X here, on Merck's Rotateq here and Isentress here, and on Progenics' PRO140 here. The co-conferences run through tomorrow: more infectious disease news than you can shake a stick at, here.
  • Plenty of arthritis news out of the American College of Rheumatology meeting in SF as well. Wyeth talks up Enbrel's advantages over DMARDs here, Roche's Actemra's positive Phase III data discussed here, and Reuters reviews the outcome of trials of JNJ/S-P's golumumab here. More ACR headlines here.
  • EyeonFDA points us over to Covalence's quarterly rankings of ethical companies, where GSK leads the way among pharmaceutical companies (while BMS is apparently making the most 'progress'). But with no pharmas cracking the top ten that probably isn't much to crow about. Like winning the NL West.
  • mmm, beer. mmm mmm, beer that's good for you?
  • It wasn't just ICAAC and ACR on the clinical acronym front this weekend. The EAP (European Academy of Pediatrics) got in on the action as well. At EAP, Ikaria Holdings (a quite interesting biotech focused on therapeutic gases--read more here) announced Phase III results from a trial of inhaled nitric oxide for the treatment of bronchopulmonary disease (BPD) in premature babies, though sadly the treatment unexpectedly failed to show any benefit.
  • Ben Goldacre's Bad Science column this weekend highlights the work done by ClinPsych blog examining "yet another small print criticism of a trivial act of borderline dubiousness which will ultimately lead to distorted evidence, irrational decisions, and bad outcomes in what I like to call 'the real world'". What's that, exactly? The duplicate publication of positive data on Lilly/Boehringer's duloxetine (Cymbalta). Last week, the drug was turned down in Europe today as a treatment for fibromyalgia.
  • Why Can't Us?
image from World Series game 4 by flickr user mjkmjk used under a creative commons license.

Friday, October 24, 2008

DotW: Credit Crunch

After weeks of extraordinary effort by the world’s governments and central banks, it looked on Monday as if the glacial flow of credit had finally begun to thaw. But a rash of negative earnings reports--many from our own industry--sent the Dow crashing more than 500 points on Wednesday and it's been a wild ride ever since.

It's enough to drive a person to drugs. Too bad a growing percentage of people appear worried that they can't afford the "better living through chemistry" habit. According to a recent report by IMS Health, the number of prescriptions dispensed in the US through August of this year was lower than in the first eight months of last year.

The news is probably cold-comfort to folks at Merck and Schering Plough, where unwritten Vytorin scrips are the primary problems these days. Both reported lackluster earnings numbers this quarter, as did GSK, and Pfizer. Millions of unfilled Lipitor scrips aren't really to blame for Pfizer's troubles, of course. And despite its efforts to capsize (er, we mean right-size) itself and boost growth without an acquisition, rumors again swirl that gobbling up Bayer Pharma is the company's last best hope. Hope that $0.32 dividend they issued yesterday assuages some angry investors.

BMS was one of the few to escape the earnings storm, but it, too, had its own share of troubles. The company took a $224 million charge because of investments tied to auction-rate securities that have dogged the company since earlier this year. Wyeth also revealed it wasn't immune to the crazy world of mortgage-backed securities: the pharma took a $68 million pre-tax charge because it held Lehman Brothers and Washington Mutual corporate debt. (Oops!)

It's still mission critical at many biotechs, too. This week Maxygen announced it was examining strategic options, AdventRx reported the resignation of its CEO and a reduction in headcount to conserve cash, while Xoma joined the wave of companies pursuing alternate financing deals. Meanwhile Phenomix (see below), which filed its S-1 back in January, finally came to its senses and pulled its IPO, citing--guess what?--market conditions.

Clinically, the news was pretty grim too. The FDA delayed or denied the approval of at least four drugs this week, including Forest's milnacipran and Pfizer's Fablyn. And all those Big Pharma piling into biologics because of their theoretical safety and easier path to market might want to stop and read a new report published in JAMA, which shows these large molecules aren't really any safer in the long-run than their small molecule cousins. Off-target effects may not scupper the drugs, but on-target side-effects are certainly something to worry about.

Depressed or in need more fiber in your daily deal-making diet? We prescribe this highly effecitve placebo:
Myriad Genetics/Myriad Pharmaceuticals: Myriad Genetics announced the long-expected spin-off of its drug-development business this week. During a call detailing the impending split, Peter Meldrum, Myriad Genetics' CEO, noted that the company was fortunate to have over $400 million in cash--a cool $100 million of which came courtesy of Danish drugmaker H. Lundbeck in a licensing deal for the now defunct Flurizan. According to Meldrum the cash enables Myriad Genetics to "spin off the pharmaceutical business, provide them with enough cash for them to move forward and achieve their goals, and yet retain a substantial cash position back at the parent company." Once the spin-off is complete, the companies will operate as entirely independent entities, with no collaborative agreements or arrangements between them. (So much for an amicable drug/companion diagnostic tie-up.) Myriad Genetics's testing biz reaped over $200 million in sales last year thanks to the growing popularity of diagnostics such as BRACAnalysis for hereditary breast and ovarian cancer and Colaris for hereditary nonpolyposis colon and endometrial cancer. Increasingly the company was appealing to two very different sets of investors--those appreciative of steady profits and lower risk were drawn to its diagnostic capabilities while more traditional biotech investors favored the drug development abilities. Despite tough financial times, "The Pink Sheet" Daily reports that the diagnostics entity expects to ramp up its deal-making activity. The same should also be true for the pharma co. Because of the increased transparency in terms of ownership rights, it will be easier for Myriad Pharmaceuticals to partner--or sell--its pipeline of infectious disease and oncology products. (CNS has apparently gone by the wayside, a victim of the recent Flurizan failure.)

Novartis/Nektar: Nektar announced this week that it had sold it pulmonary business assets to Novartis for $115 million. As part of the deal, Novartis also obtains 140 Nektar personnel, certain intellectual property and manufacturing methods, as well as capital equipment and manufacturing facility lease obligations. The two companies first teamed up on Tobramycin (Tobi) inhaled powder back in 2002 when they were known as Inhale Therapeutics and Chiron. As our colleagues at "The Pink Sheet" Daily write, the transaction reflects a year-long attempt to transform from a drug delivery play into a drug development provider after the stunning failure of Exubera showcased that convenient delivery doesn't necessarily translate into success in the marketplace. Back in February the company cut 150 staffers and announced the resignation of one of its stars, Hoyoung Huh, PhD, who left the company to take the CEO position at the PARP-focused biotech BiPar Sciences. The move allows Nektar to tighten its belt; in a same day investor call, CEO Howard Robin noted off-loading the Tobi program will save about $45 million in P&L expenses and cut its cash burn by roughly $30 million. "This transaction is a perfect example of our ability to monetize assets that have little future value to Nektar, but could be potentially valuable to other companies," he said. Unlike many of its biotech brethren, Nektar certainly isn't hurting for cash; it should end 2008 with about $440 million on-hand to build its drug biz.

Lilly/Amylin: With $125 million in cash up-front, this LAR supply agreement is one of the biggest deals of the week. The question is, how big a deal is it for the future of the exenatide franchise? Lilly and Amylin, of course, already share the GLP-1 anti-diabetic Byetta and rights to the eagerly awaited once-weekly formulation. In that sense, this is no big deal: Lilly’s up-front payment reflects its share of the capital investment made by Amylin in the LAR commercial facility. The agreement also includes a commitment by Lilly to reimburse Amylin “for its share of the more than $500 million capital investment in the facility through the cost of goods sold” for LAR. In other words, Amylin gets $125 million now, and the rest when--or is it if?--LAR comes to market. Both companies describe the arrangement as an expected evolution in their alliance, so no big deal. Investors, though, see it as a vote of confidence by Lilly in the future of LAR. Given the safety issues in the class and Lilly’s work on its own GLP project, that is a very big deal indeed. There is another vote of confidence here as well: In addition to the up-front cash, Lilly and Amylin signed a separate $165 million loan agreement. The terms aren’t overly generous (Amylin can’t access the capital until December 1 2009, and interest will be at LIBOR plus 5.25%). But in this financial climate, the implication that Lilly stands behind Amylin’s credit worthiness may be a very big deal indeed--Michael McCaughan.

Forest/Phenomix: It was a good news bad news kind of week for Phenomix. The company officially called off its public offering on Thursday and got back to the business of spinning its story. And part of that tale is a collaboration with Forest worth $75 million up-front and up to $265 million in additional milestones for the biotech's Phase III DPP-IV inhibitor dutogliptin. Getting any deal for this 5th in class molecule is an accomplishment given the general lack of interest in primary care drugs by Big Pharma these days. But Forest clearly paid close to top-of-the line for the privilege even though the molecule doesn't appear to be that differentiated clinically from the already approved Januvia (Merck) and potentially soon-to-be-approved saxagliptin (Bristol-Myers Squibb) and alogliptin (Takeda). (Novartis is resubmitting its version, Galvus, in 2009.) Indeed, the deal price says quite a bit about Forest's desperate need for late stage pipeline. On Monday the company reported that the FDA had missed the user fee date of its fibromyalgia drug milnacipran. Reporting earnings the very next day, the company avowed to put its $2.6 billion war chest to use shoring up a pipeline that faces heavy generic competition in the coming years. In an interview, CEO Laura Shawver noted that Phenomix has been in discussion with Forest for at least a couple of years. One reason Forest rose to the level of partner-of-choice (other than willingness to pay top dollar) is their impressive success marketing drugs in highly competitive fields--on Tuesday's earnings call, for instance, Forest noted progress getting Bystolic off the ground in a crowded beta-blocker market. Still Phenomix is carrying a good deal of risk despite the generous up-front. The two companies will jointly develop and commercialize dutogliptin in the US, while Phenomix retains development rights outside North America (In Canada and Medico, Forest has exclusive rights). That means Phenomix is still paying quite a bit--pivotal trials for a diabetes drug ain't cheap or fast--before it's likely to see a pay-off in the marketplace.

GSK/Vitae: It seems that pharma’s flight from some of the better-served areas of primary care medicine has caught up with another biotech firm. This time it’s Vitae Pharmaceuticals, which is reaquiring full rights to its renin inhibitor program from GSK. GSK originally licensed the renin program from Vitae in 2005 (we wrote about Vitae’s strategy at the time, here) and Vitae intends to advance it to the clinic now on its own. Despite the promise of renin as a target in hypertension GSK may have decided that the area is relatively well-served with existing (and often generic) beta blockers and ace inhibitors (like Coreg CR?) and certainly wasn't heartened by the mediocre commercial performance of Novartis' renin inhibitor, Tekturna. Oddly enough on the day Vitae announced GSK’s renin decision, the Big Pharma spent $170 million acquiring the rights to the OTC brand Biotine, a line of dry-mouth products including gels and mouthwashes. Vitae’s best bet—if it can’t find another Big Pharma partner—would probably be to pursue renin inhibition in a small, specialist market. The program continues in hypertension, diabetic retinopathy, CHF, and related cardiovascular indicatios, according to the company’s press release.

GSK/Exelixis: It's the end of an era--or error--depending on your viewpoint. And, no, we aren't talking about the demise of the Red Sox Sunday night. On Thursday, Exelixis and GSK announced that their 6 year collaboration had come to a natural end in a positively chipper press release touting the biotech's retention of rights to a promising Met, RET, and VEGF2 inhibitor called XL184. And really from Exelixis's view there probably are a number of reasons to celebrate. The collaboration provided the South San Francisco-based biotech with much needed cash--about $260 million according to CEO George Scangos--at a critical time in its history. But it had outlived its usefulness, keeping valuable products that could have been partnered elsewhere for significant cash in limbo while GSK took its time deciding which products to bring in-house. It also made it tough to talk to investors, who questioned the depth of the biotech's wholly-owned pipeline. “Now we can say ‘Here’s our pipeline. If you invest in us, this is what you are investing in,” says Scangos. He notes that Exelixis now has sole rights to 9 compounds that are currently in the clinic with real human data. “It’s as good a pipeline as any out there and it's ours,” he says. “This is a great event for us.” But maybe not such a great deal for GSK, which has taken the option-type deal to new heights in relationships with Theravance, Cellzome, AFFiRiS, and Targacept among others. Sure, GSK can afford to plunk down several hundred million for essentially one product--for now.

(Image courtesy of Flickr user Anders B via a creative commons license.)

Thursday, October 23, 2008

BIO Has TiVo and It Knows How to Use It

Via our colleagues at The Pink Sheet, we learn a little about the Biotech Industry Organization's television viewing habits.

Wedged in between the Seinfeld re-runs and America's Next Top Model on BIO's TiVo is the CBS drama "Eleventh Hour" (which airs, oddly, at 10p on Thursdays). Why's BIO so interested? Well apparently the show involves a government scientist who tries to protect people from deadly experiments and the sketchier elements of science. The show's web site describes it thusly:

ELEVENTH HOUR from acclaimed producer Jerry Bruckheimer follows Dr. Jacob Hood, a brilliant biophysicist and special science advisor to the government, as he investigates scientific crises and oddities. His jurisdiction is absolute and Hood is dogged in his pursuit of those who would abuse and misuse scientific discoveries and breakthroughs for their own gain. His passion and crusade is to protect the substance of science from those with nefarious motives. He is called in at the eleventh hour and he represents the last line of defense.
Nefarious motives! Absolute jurisdiction! Dogged pursuit! Brilliant biophysicists! So far, so harmless sci-fi fun, right? Well, sure, but "At first we were concerned how the show might portray the industry," BIO VP of communications (and keeper of the TiVo remote) Jeff Joseph tells Pink Sheet's Brenda Sandburg. "We wanted to use it as an opportunity to educate people."

And thus BIO's own was born. So far BIO has used the site--which is advertised via Google's AdWords program--to inform viewers about cloning technology and heart attacks. ("Eleventh Hour" premiered on October 9 with an episode about a father trying to clone his dead son and followed up last week with eleven year old heart-attack victims.)

We understand BIO's urge to educate television audiences and think the association is on the right track using what could be a popular program to inform interested viewers about its members and their science. But we would argue that BIO has bigger fish to fry than "Eleventh Hour." Come on people, have you not seen NBC's "Heroes"? There's more gene-altering pseudoscientific mumbojumbo in five minutes of that program than in entire months of programming on the SciFi Network. (Full disclosure: Heroes is, despite the unintentional hilarity, a personal favorite, though we have never seen Eleventh Hour.)

But tonight BIO is upping the ante and Live Blogging (!) the third episode of "Eleventh Hour"--which promises some delicious facts about food-related paralysis.

Enjoy your dinner!

image from flickr user LynGi used under a creative commons license

Venture Round: Big Buyers Cautious

With the public markets having finished their final lap around the circular ceramic swimming pool, the hopes and dreams of medical device VCs might drift to the possibility that major medical device companies might step up the pace of mergers and acquisitions.

After all, the fires raging on Wall Street have stripped the valuation off many a developed device company, creating potential values for major medical device companies looking for a bargain.

But device companies aren't biting ... yet. Those attending our first ever Medical Device Investor Day listened as business development executives representing the industry's major medical device makers listed their likes and dislikes for the audience at Boston's Westin Hotel.

Overall, business development folks from nearly a dozen companies gave a backstage view to their own business and development offices. In almost every case, companies laid out strategies that included a healthy dosage of mergers and acquisitions.

But these big device companies will be careful shoppers. Price will certainly come into play, but it's not the biggest concern. What is? Data. Data. Data. Exec after exec implored the entrepreneurs in the audience to have as much data and evidence at the ready when the due diligence starts.

Even more importantly, big device buyers say the data must be clean and ready to withstand a vigorous review from the FDA and CMS. Sure this sounds obvious, but one device exec says FDA regulators are stretched too thin to give equal review to every application. Therefore, smaller companies might get a pass with less data but once that small company is acquired its product will be given the Big Company treatment. Biz Dev folks hate surprises.

Finally, these acquirers aren't going to be pushed into a deal by plummeting prices. Instead, these companies say they'll continue to target only companies that fit snugly into their company's strategic plans. Dennis Crowley, vice president of corporate development for Covidien Ltd., says those companies that have only "limited strategic value ... I hate to say it, but they're dead." [UPDATE: We regret that this quote from an IN3 panel was misattributed to Dennis Crowley of Covidien. He did not say it and it doesn't reflect his views.]


A few weeks ago, we presented the doom-and-gloom scenario the venture capital industry faces as part of the fall out of Wall Street's meltdown. As promised we explored the possible ramifications even more closely in our upcoming START-UP magazine here.


As we suggested in our earlier post and explored further in our current article in SU, venture capital firms are beginning to run into a bit of resistance to call downs. Venture firms typically call on their limited partners who have already committed to their funds to transfer dollars at a regular intervals, perhaps quarterly, or whenever the VCs have a deal lined up. This piece by VentureBeat says LPs are beginning to balk at call downs.

Calpers isn't one of those LPs, as far as we know, but it did lose a bundle. (Hat tip to the WSJ's Deal Journal blog.)

This no doubt will bite into deal flow. In the past, VCs might have borrowed money to cover the call down until the money was transferred. (This not only gave the LPs more time to comply but it also boosted the internal rate on returns for the VCs.) But banks simply aren't lending money out these days.


We're not sure if every venture capitalist is this careful, but one device investor we talked to said he's been spending a fair amount of time meeting with his portfolio companies to ensure that the money his firm invested is safely invested.

His concern seemed very real. Typically, a company that raised millions in a venture round would stash a few months of expenses in an easy-to-access checking account, with the rest going into money market funds or some higher interest-earning vehicle.

Prior to the passage of the bailout bill, this VC went from company to company inquiring about the location of invested capital and exploring whether or not the location was the safest possible. As he said, he didn't want to be in the position to tell is LPs the money he'd invested was lost in the markets.


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

Wednesday, October 22, 2008

FDA Advisory Committees: Who’s Running the Show?

You wouldn’t think of running your company without a CEO, right? Sure, from time to time, your company might find itself with an acting chief executive due to a merger or sudden departure. Maybe it’s a member of the board, or a former company official that comes out of retirement. But since that’s not a great situation for anyone, you try to quickly find a permanent replacement.

So it may make you a bit uncomfortable to know that at your next FDA advisory committee meeting, chances are that not only will the committee be lacking a permanent chair, it’s likely it won’t have had one for quite some time.

In fact, three quarters of advisory committees in the Center for Drug Evaluation & Research do not have a permanent chair. That’s 12 out of 16 committees. Only four—Anethestic & Life Support Drugs, Pharmaceutical Science, Psychopharmacologic Drugs and Reproductive Health Drugs—have permanent leadership.

(For an analysis of the advisory committee system—including a handy chart of vacancies in each committee—read this story in the October issue of The RPM Report.)

Chairs play a big role in the way advisory committee meeting is conducted. They can steer the discussion one way or another, tweak the questions from FDA, and be more or less forgiving in allowing the sponsor to clarify discussion points. Some chairs are better at managing meetings than others, and the absence of a clear leader can make the process less predictable for drug sponsors.

The absence of leadership at the top is really indicative of the systemic problems across FDA’s advisory committee system. Chairs are typically “promoted” from within, so when there aren’t enough committee members to go around, chairs—with the extra responsibilities that come with the job—are even harder to find.

And FDA is having a hard time finding committee members. Between the new conflict of interest rules and the existing downsides to serving on a committee, FDA has a major problem on its hands.

That might not be such a big deal, so long as FDA wasn't holding many advisory committee meetings. But that’s not the case. In fact, the agency will bring more new products before an advisory committee this year than it has since at least 2004. That’s a lot to juggle at a time when FDA is having a hard time filling those seats with permanent members.

Given the amount of time spent on preparing for an advisory committee review—including those mock panels—it would be nice to at least know who you’ll be facing across the conference table. And in case you’re still not convinced that FDA's problem with filling vacancies is also your problem, consider this: how would you like to have Sid Wolfe as a voting member at your next review?

The Good News for Biotech: New Regulation Opens a New Path to Profitability

In the absurdist economic world we now endure – simultaneous credit freeze and market meltdown – we hardly know how to be optimistic about biotech. As we noted here, high-risk investments like biotech attract the extra cash investors have in their funds. And since there’s likely to be precious little extra cash for the foreseeable future and, for mutual funds, some portion of that cash likely to have to stay as cash to cover redemptions, the outlook isn’t rosy.

And yet, long term, there is hope for biotech.

Our view (bits of which we’ve expounded on before, here and here) is this: In starkest terms, the regulatory system, the single biggest stumbling block to pharmaceutical success, is tilting biotech-wards. Within FDA, admittedly, there’s a certain skepticism about small-company development programs (of the “they don’t know enough to do it right” variety). But the fact is that fully a third of the 60 NMEs approved between ’05 and ’07 were from small companies.

And the economics of these approvals are likely to bend even more favorably towards small companies. With the passage of the FDA Amendments Act last year, the FDA now has a tool (Risk Evaluation and Mitigation Strategies, or REMS) that allows it more ways to say “yes” to new drugs – by placing extra restrictions that limit the patient population that can access the product.

Put another way, the path to regulatory approval is easier the more willing a sponsor is to accept limits on how a medicine can actually be sold in the marketplace.

Big Pharma, understandably, hates that idea. Their central business model relies on selling a chronic-care therapy to the broadest possible population of patients. But biotech, without the massive investment in marketing and regulatory infrastructure Big Pharma must support, can – if they’re smart – wholeheartedly embrace the notion.

Take the constipation drug Entereg, which GlaxoSmithKline in-licensed from Adolor hoping to have a blockbuster on its hands. FDA held it up for two years thanks to a cardiovascular safety signal (no more cisaprides!) until it was finally approved, with a REMS that limited it to short-term hospital use and a market of maybe $200 million. An economic non-starter for GSK ... but had Adolor developed the drug on its own, focusing from the get-go on the specialist market and constructing its regulatory and commercial infrastructure accordingly, its investors might have done very well, thank you. (As it is, Adolor is trading at a market cap of about $170 million – back in February ’06 the company was worth nearly $1.3 billion)

GSK took away some lessons from the experience, too. Via its blockbuster put-call-option deal with Theravance (written about in detail here), it had the right to in-license, among many other compounds, the biotech’s promising motility agent, TD-5108. But GSK said no to the compound, having lived through the stomach-churning experiences of Entereg and, before that, Lotronex. (That irritable bowel syndrome drug was pulled from the market for fear of causing intestinal blockages and then delicately relaunched with a kind of early prototype of a REMS approval.)

GSK’s decision casts some fairly deep shadows over Theravance’s original strategy: do the early development of significantly improved versions of Big Pharma’s biggest primary-care drugs and sell the results to Big Pharma.

Certainly, the other Big Pharmas to whom Theravance is now free to sell TD-5108 are going to tread very carefully around the compound, since they’ve also seen what’s happened to Entereg, Lotronex, and Zelnorm -- the Novartis irritable-bowel syndrome drug yanked from the market for yet a different side-effect.

And it’s pretty likely some distressing signal will show up with TD-5108, because the FDA has told Theravance, in effect, that the drug will require huge trials if it wants it approved for a chronic-care population.

But the GSK rejection also opens up what may be an even bigger opportunity for Theravance: going ahead on its own, specialist track. We don’t know if TD-5108 has much of a specialist opportunity. However, if it does, Theravance might be able to recapitulate the Entereg approval, by proposing its own relatively restrictive REMS, but on a profitable, express route.

With about $200 million in cash, Theravance has some runway and—when GSK decided not to buy a majority of its shares, its own investors' stuck with Theravance by not putting their shares to GSK—a kind of permission to build an independent road.

What’s more, any REMS Theravance constructs could be an additional patent-hurdle generics must leap. Even if the REMS itself isn’t patentable, few generics firms will be able to afford the kind of monitoring machinery required to compete.

Indeed, here is another case where smaller market sizes may end up being more profitable: generic companies will go after a billion dollar market regardless of the extra costs of special monitoring. But there will probably be fewer companies willing to sell a generic version of Entereg.

We’re not minimizing the cost of building a REMS-based approval road or the difficulties in financing it. But we are saying that those biotechs who can identify these niche opportunities and raise the money for them have a brand-new opportunity. They can choose a comparatively less risky development path than Big Pharma can afford, and then either sell the results to larger drug companies who want, but are unable to build their own, specialist businesses … or go on to construct self-sustaining commercial organizations right-sized for a REMS-defined world.

That’s the kind of choice investors like to have.

Image courtesy of Holaday98 and used through a creative commons license.

Tuesday, October 21, 2008

Andrew Witty Has Seen the Future and the Future Is Mouthwash

Biotene mouthwash. And toothpastes and gels and chewing gum to alleviate dry mouth. GSK bought the Biotene brand for $170 million, it announced today, from the private firm Laclede.

Biotene generated about $50 million in revenue last year, according to GSK's release, and joins a host of consumer oral-care brands at the Big Pharma, including Aquafresh. (For the low-down on all things consumer healthcare, visit our colleagues at The Tan Sheet.)

GSK's other news today is that it is opting out of its collaboration with Vitae Pharmaceuticals. The two firms were developing Vitae's preclinical renin inhibitors for hypertension under a deal signed in 2005. (Read about Vitae's strategy in this 2005 Start-Up article.) Vitae plans to continue development of the renin program on its own.

The timing of the two moves by GSK is certainly coincidental. Still their juxtaposition illustrates well where this Big Pharma--and probably a lot of Big Pharmas--are moving. Cardiovascular drug development isn't extremely popular these days, especially in areas like hypertension that are relatively well-served by existing (often generic) therapies; companies (like Pfizer) are opting out of that space in particular and much of the generic-heavy primary care areas in general.

And they're also diversifying into consumer medicine at an increased clip. Pfizer's likely kicking itself for offloading its consumer business to J&J--brands like Zyrtec helped boost growth overall at J&J despite a poor showing by the branded pharma unit in the last quarter's results. GSK's CEO Andrew Witty said on a recent earnings call that consumer medicine R&D is also more predictably successful. As Roger Longman wrote in the September IN VIVO:

At GSK's earnings meeting, Witty described OTC product development as the antidote to R&D attrition. Its Aquafresh White Tray tooth whiteners cost £6 million to develop and, in its launch year of 2007, did £21 million in sales. Its Commit smoking-cessation lozenges, launched in 2001, cost £26 million to develop and did £329 million in 2007 sales. Witty claims that 70% of GSK's consumer R&D projects end up creating marketed products. Meanwhile, he says, the average approved GSK drug takes two years to recoup its R&D costs – but that figure, he says, doesn't include the many projects which fail along the way (indeed Witty couldn't say whether pharmaceutical R&D was actually generating positive returns).
Of course not every consumer medicine story has a happy ending. Sales of GSK's own OTC weight-loss product Alli, for example, have fallen flat after a significant and expensive roll-out. But look for GSK and other Big Pharma to continue to diversify away from their traditional strengths in branded primary care medicines: into OTC, branded-generics, me-too biologics, etc.

You don't need Witty's crystal ball to see that it's in pharma's future.

Monday, October 20, 2008

Long Tail of the Law

Drug products are evolving long tails and they are going to carry costs for firms well into the future.

Drug safety commitments in the US and in Europe are developing into regulatory requirements that will stretch out for years, requiring time and resources from companies even after the products may have lost all commercial viability.

Two recent examples demonstrate this quirk of regulatory evolution.

Pfizer’s inhaled insulin, Exubera, was pulled from the market a year ago in October 2007; but a year later, FDA is imposing a formal Risk Evaluation & Mitigation Strategy on the product. That’s the authority that the agency received for controlling products in the post-market from the FDA Amendments Act in September 2007.

An article in “The Pink Sheet” (October 13) delves into the reasons for FDA’s belated regulatory requirements on the discontinued product. FDA says it expects Pfizer to undertake a supplemental NDA filing for Exubera to develop a medication guide and a communications plan to set a precedent for future inhaled insulin products that might try to come to market citing Exubera as a reference.

The legacy regulatory requirement is going to likely to cost Pfizer time and effort and stretch well past the commercial demise of Exubera.

FDA is also using its new legislated authority to further require Pfizer to submit data from Phase IV commitments. When Exubera was approved, the Phase IV commitments were part of an agreement reached by the company with FDA to conduct seven studies on 85,000 patients. FDA is converting that agreement into a mandatory requirement for six of the studies.

Pfizer says the studies have been terminated. FDA explains that it added the beyond-the-commercial-grave requirement to assure that any data that was collected by the sponsor would be submitted. As FDA says, “while the completion of the trials was not a mandate, the submission of data was.”

Shire also has had a recent experience with a withdrawn product that demonstrates the lingering costs and obligations even after a product is off the market.

At mid-year, Shire said it was discontinuing its overseas erythropoietin product, Dynepo, as a result of lower prices for the EPO class due to the introduction of biosimilars at prices 20-30% below branded levels. The company did not mention the general troubles in the ESA class from declining indications but that could not have helped the commercial prospects.

For commercial reasons, Shire decided to call it quits. But for regulatory reasons, the product will have lingering costs.

According to a late July briefing by the company on first half results, Dynepo will cost Shire about $6.5 million to warp up previous post-market study requirements. The company explains that “the costs are part of the commitments made to participants, centers, doctors, and clinical staff.” Like Pfizer, the company does not plan to finish the studies, but costs remain.

The situation of continued studies after market withdrawal is not new. With the post-market becoming more heavily regulated and with FDA having authority to require work (not just request it), companies should be prepared for long tails dragging behind dead products and holding back operating results.

While You Were Watching Game Seven

Our condolences to our readers (and fellow bloggers here at IVB) from Red Sox "nation". We don't know any Devil Rays fans, so we don't know where to offer our congratulations today (and direct our trash talk starting Wednesday).

Meanwhile, very little news out of industry over the weekend, and what news there was seems to stem from ongoing coverage of how the financial crisis and general economic implosion might affect the pharmaceutical industry. So far pharma has held up well in the grand scheme of things, while banks continue to get shellacked. On Sunday ING became the latest to get an injection of government cash when the Dutch central bank bought 10 billion euro worth of its shares.

So, while you were ignoring your 401k ...

  • The FT looks at pharma's collective cash and suggests more M&A is in the cards. GSK, for example, is slowing its buy-back program to reinforce its war chest for acquisitions. But the piece also notes that pharma on the whole is more geared than in the past, which could present some obstacles.
  • Novartis' Q3 results today is chock-full-o-news: 550 layoffs, management shuffling, branded sales good, generic sales not as good. Novartis also said it had very limited exposure to the ongoing financial crisis.
  • But meanwhile, Pfizer's head of European operations reminded German paper Die Welt, the crisis will almost certainly eventually impact national and private health insurers, which will pass on the pain to pharmaceutical companies. (h/t Reuters)
  • Life sciences start-ups continue to buck the trend, but overall investment by VCs was down again in the third quarter, reports the SF Chronicle.
  • Will GSK become a target for activist shareholders? (h/t Pharmagossip)
  • And finally ... one grammar-challenged question becomes a city's irony-tinged rallying cry: "Why Can't Us?"

Friday, October 17, 2008

DotW: Batten Down The Hatches

After the capital infusions of banks around the globe by their respective governments failed to restore investor confidence and reduce Wall Street's volatility, the m.o. at many companies is "batten down the hatches, mate. It's gonna be a rough ride."

And the industry is already starting to see the fall-out. Perhaps not surprisingly, hardest hit are the smaller biotech and specialty-focused companies who don't have the luxury of stock piles of cash. On the heels of AtheroGenics' decision last week to declare bankruptcy, come restructuring announcements from DeCode Genetics and Par Pharma.

But these days, even a healthy cash position won't prevent the need to explore "strategic alternatives." Case in point: Cell Genesys, which had roughly $150 million in the bank as of Sept. 30. On Thursday the company announced it was terminating the late-stage VITAL-1 trial of its risky GVAX prostate cancer vaccine--yes, the one it partnered to Takeda for $5o million up-front earlier this year--due to lack of efficacy. As we noted in an earlier post, this is the second major clinical set-back for the company this year--over the summer it suspended its other GVAX immunotherapy trial, VITAL-2, for similar reasons. As the biotech weighs options that include sale or liquidation of assets, it's doing its best to conserve what is now likely seen as its most valuable resource--its war chest--slashing the work force by 75%.

And its not just the smaller players that are suffering. Companies such as WuXi PharmaTech, which posted strong earnings growth for the third quarter, cautioned that the financial crisis sweeping the globe would cut into its 2008 profits, while renewed doubts about the completion of the Daiichi/Ranbaxy deal have surfaced. (Reuters notes today that Daiichi has managed to purchase a 20% stake in the generics maker thus far.) And the WSJ reports that privately-held Actavis Group, one of the world's biggest generic-drug makers, could also be up for sale. The reason? The firm is 80%-owned by private-equity firm Novator, the investment vehicle of Icelandic billionaire Thor Bjorgolfsson, who lost a big chunk of change in the Icelandic banking collapse.

If Big Pharma is relatively insulated (we have more on the impact of the credit crunch in the October IN VIVO), it's by no means smooth sailing for these companies either. Sure, most still have strong cash positions--but a new report issued this week by Moody's shows that a significant portion of that capital is trapped in off-shore accounts. And, at least for now, companies aren't willing to take the tax hit required to repatriate those earnings. As a result, they're taking on debt to bolster sagging pipelines despite the risk--and rising costs--associated with borrowing. But as Lechleiter, CEO of Lilly, told the Indy Star earlier this week, the bigger risk is to do nothing and watch as the patents on blockbusters like Zyprexa and Cymbalta expire--or wait for an approval of Effient.

Meantime ports in this market storm seem to be the companies whose pipelines are diversified beyond traditional pharmaceutical products. In its quarterly earnings call on Monday, for instance, J&J posted positive news, mostly on the strength of its consumer biz and the sales of allergy medicine Zyrtec. That push to diversify is one reason Pfizer created an established products business unit--we used to just call them generics--as part of its recent sweeping reorganization.

Feeling queasy? We don't blame you. We prescribe some chamomile tea and...(Definitely NOT a Red Sox game; though perhaps last night's result is a sign that miracles do happen.)

GSK/BMS: On Wednesday, GSK announced it will acquire Bristol's Egyptian mature products business for $210 million. The deal means GSK will become the leading pharmaceutical company in Egypt, with a market share of 9%. In addition, GSK will acquire 20 branded products including the antiobiotic Duricef and the ACE inhibitors Capozide and Capoten. In addition, GSK will take ownership of BMS's high quality manufacturing facility outside Cairo. The move isn't too surprising given the operational strategies now apparent at both companies. Since taking over as CEO earlier this year, Andrew Witty has signaled his belief in the need to diversify GSK's business beyond branded drugs, including luring Abbas Hussein away from Lilly to head the pharma's newly created emerging markets group. In July, the company licensed rights to South African Aspen Pharmacare JV Onco Therapies' portfolio in 95 emerging markets (excluding India and sub-Saharan Africa). BMS, meanwhile, continues to take a contrarian view, selling off what it considers non-core businesses in an effort to build its cash position for future in-licensing efforts. Since last December the mid-size pharma has reaped more than $4.6 billion by selling off both its medical imaging unit and its wound/ostomy company, ConvaTec. (The company also plans to spin-off 10% -20% of its nutritionals business, Mead Johnson. An S-1 has been filed, but who knows when the offering will occur given the current business climate.) As recently as FDC-Windhover's annual PSA confab, Jeremy Levin, SVP of external science, technology, and licensing, signaled that BMS's strategy won't shift, even given the market turmoil. "We are going to stick to our knitting. We will face the problems head on and continue to do what we are good at," he said.

Alcon/GSK & Alcon/Origenis: Alcon brokered two deals this week to expand its future drug portfolio, out-licensing from GSK its troubled PFE-IV inhibitor Ariflo, which has struggled for years to gain approval, and expanding its existing research collaboration with Origenis. Financial terms of neither deal were disclosed, but, in the case of Ariflo, do include an up-front payment and developmental milestones. (Translation: Alcon probably got a pretty good deal on the product.) The two deals appear to be a targeted attempt on Alcon's part to add both early and late stage products. Of Ariflow, Sabri Markabi, MD, SVP of R&D and Alcon's CMO, noted: "We believe the cilomilast compound has potential for treating dry eye as well as other ophthalmic conditions." Apparently GSK did not. With the recent appointment of Ellen Strahlman, MD, an ophthalmologist by training, as their CMO one would assume GSK would have developed the drug for the indication if they felt comfortable with its therapeutic profile. But it could also be a sign of GSK's attempt at more rationale development program--one that attempts to monetize under-performing assets and off-load the development risk, while retaining future rights should the product actually pan out. In this case, GSK has the option to co-promote the product with Alcon, and it also retains rights to Ariflow for non-ophthalmic conditions. The Alcon/Origenis deal is a bit more vanilla: Alcon's rights to products discovered through the partnership are for ophthalmic and nasal applications, while Origenis retains certain rights to all other uses. For its work, Origenis will receive research payments based on developmental milestones and royalties based on sales of any future products coming out of the partnership. Alcon has a similar early stage research agreement with Kalypsys.

Sanofi/TB Alliance: In certain circles, doing well by doing good is becoming de rigueur. Last week saw news of a tie-up between Summit and the Lilly TB Initiative. This week Sanofi-Aventis makes news of its own in the TB arena. The pharma has teamed up with the Global Alliance for TB Drug Development, a not-for-profit focused on this bacterial scourge, to accelerate the discovery, development and clinical use of drugs against TB. Under the terms of the agreement, the two organizations will share information on their respective projects and exchange insights on developments in TB drug research; they will also consult with each other on relevant regulatory strategies related to developing countries. "This collaboration with Sanofi-Aventis underscores the commitment of the TB Alliance to partner with leaders in science and business to achieve our goal of making faster, better and affordable TB drug regimens available as soon as possible," said Dr. Jerome Premmereur, President and Chief Executive of the TB Alliance. Sanofi is no stranger to developing TB drugs--it discovered rifampicin in the early 1960s and markets several other anti-infectives targeted at the microbe. But don't think this collaboration just benefits the not-for-profit TB Alliance. Thanks to legislation concerning priority review vouchers, a new incentive program created by the FDA Amendments Act of 2007 that rewards sponsors of drugs that treat "neglected tropical diseases" by giving them the right to receive a priority designation on any future new drug application, it's also likely that Sanofi will reap some kind of reward. And that suggests the voucher system may be working exactly as intended.

Ono/Progenics: Oh yes, Progenics has licensed Japanese rights to develop and commercialize the subcutaneous version of its methylnaltrexone (Relistor) opioid-induced constipation drug to Ono Pharmaceutical. The Japanese pharma will pay Progenics $15 million up-front and up to $20 million in potential development milestones. Should the drug get Japanese approval Ono will pay additional milestones on sales and an undisclosed royalty. In addition, Ono has the option to acquire rights to other future formulations of the product (including IV and oral versions). Progenics licensed worldwide rights to Relistor to Wyeth in 2005, and Wyeth later gave back the Japanese rights (and the onus to pay $7.5mm in milestones on the subq formulation in Japan). So far Wyeth has paid Progenics $60mm in up-front payments and $39 million in milestones related to methylnaltrexone; Progenics also receives a royalty on sales. Relistor has enjoyed somewhat of a resurgence this year. Widely written off as non-approvable, it's one of the few new molecular entities to squeak through FDA without additional trial mandates or a risk management plan.

(Photo courtesy of Flickr user rdaniel through a creative commons license.)