Wednesday, November 26, 2008

DotW: You Can Get Anything You Want at IVB

This post is called Deals of the Week, and it's about deals, and the week, but Deals of the Week is not the name of the blog, that's just the name of the post. And that's why I called the post Deals of the Week.

You can get anything you want at IN VIVO Blog.

You can get anything you want at IN VIVO Blog.

Log right in, it's a click away.

Just a finger tap. You don't have to pay.

You can get anything you want at IN VIVO Blog.

Now it all started one Thanksgiving ago, was on--last Thanksgiving, when Chris Morrison and I start writin' a blog about deals, but not every day, just once a week. And writin' about deals once week, you know it's a lot of work, and there's a lot of garbage you gotta sift through, but we decided it would be a friendly gesture on behalf of readers.

So we trolled around the Internet with our shovels and rakes and other implements of destruction (aka FDC-Windhover's Strategic Transactions database) looking for deals to analyze. But then a big bad editor said why are you doin' that? We are closed on Thanksgiving.

And we had never heard of a blog closed on Thanksgiving before (we don't get out much) and with tears in our eyes we drove off into the sunset looking for another place to put the garbage--I mean our deals.

We didn't find one. So we wrote our post anyway, went back and had a Thanksgiving Day that couldn't be beat, and it's been a recurring feature here at IVB ever since.

In honor of the day, we hope you consider joining the IN VIVO Blog Movement. All you've got to do is walk into the office wherever you are, just walk in and say "You can get anything you want at IN VIVO Blog." And walk out.

You know if one person, just one person does it, they might think he's really sick and they won't take him...And can you, can you imagine fifty people a day, I said fifty people a day (okay, we'd really like 1000) walking in, quoting a line from IN VIVO Blog and walking out?

And friends, they might think its a movement. And that's what it is, the IN VIVO Blog Movement.

Remember Deals of the Week? (This is a post about Deals of the Week.) Without further ado, we bring you this week's installment inspired by Arlo Guthrie. Feel free to sing along in four part harmony. With feeling.

King/Alpharma: King Pharmaceuticals' is finally king of pain. Its relentless--and often contentious--battle to win Alpharma came up aces this week. The two companies announced Nov. 24 that they have signed a definitive merger agreement in a deal that values Alpharma at $37 a share or roughly $1.6 billion. The deal, which remains subject to approval by the Federal Trade Commission, substantially bolsters King's pipeline of marketed pain products, adding Kadian and the Flector pain patch. The merger also gives King Alpharma's experimental Embeda, an abuse-resistant oral form of morphine that won a positive but not overwhelming vote of support from the FDA's Anesthetic and Life Support Drugs and Drug Safety and Risk Management Advisory Committee on Nov. 14. Together with King's own tamper-resistant version of oxycodone, Remoxy XRT, whose approval also is under review at FDA, the addition of Embeda stands to make the Bristol, Tenn.-based specialty pharma a leader in the abuse-deterrent opioid market. Analysts lauded the news: Corey Davis, of Natixis Bleichroeder called the deal "a no-brainer for King", while Cowen and Company's Ian Sanderson wrote in a same-day research note that "the merger is a strategic and financial plus for King. Still it almost didn't come to pass. Even after Alpharma had a change of heart and began entertaining the offer, King still had to come up with the financing to get the deal done--no mean feat in the current business climate. In the end, the company's lenders came up with a smaller total loan package than was originally proposed: a combined debt financing that provides King with $775 million in cash to complete the Alpharma acquisition and another $430 million on the books post-acquisition for drug development and additional deal-making. But it didn't come cheap: Cowen's Ian Sanderson estimated the proposed interest rates on both facilities were LIBOR plus 500 basis points, or 7.15 percent. "The debt repayment terms are fairly onerous, reflecting the risk aversion of the lending banks even to a well-capitalized merger transaction," he said in an interview with "The Pink Sheet" DAILY.

Novo Nordisk/Merrion: Diabetes powerhouse Novo Nordisk announced Nov. 24 that it would continue it's collaboration with Merrion Pharmaceuticals to develop and commercialize oral insulin analogs, despite its wishy washy approach to another alternate delivery technology, inhaled insulin. Under the deal, Merrion will apply its proprietary GIPET process to synthetic insulin candidates selected by Novo Nordisk. In return, the Dublin, Ireland-based biotech will receive €47.5 million ($58 million) in up-front fees and milestone payments, plus royalties, for the first product developed under the partnership. In an interview with "The Pink Sheet" DAILY, Merrion CEO John Lynch declined to break out the upfront and milestone-based deal figures. (Translation: there ain't a lot of money flowing into Merrion's coffers just yet.) The move isn't too surprising. Novo Nordisk has a history of hedging its bets when it comes to insulin delivery. That was very much the company's strategy when it partnered with Aradigm for that biotech's inhalable insulin. But following the failure of Exubera in the marketplace--and the rapid exits of both Pfizer and Lilly from the inhaled insulin stage, Novo Nordisk quickly followed suit, transferring its entire portfolio of inhaled-insulin patents to Aradigm earlier this year. Merrion might want to have a chat with another Novo partner: Emisphere. Earlier this summer Novo and Emisphere teamed up to develop an oral version of Novo's long-acting GLP-1 analog Victoza in a deal worth $10 million up-front. Emisphere is no stranger to the oral insulin field. It gave up on that delivery route some months ago.

Roche/Memory: Thanks for the memories, Memory Pharmaceuticals. The latest cash-strapped biotech lost its battle for independence on Tuesday Nov. 25, when Roche announced it would put an end to its partner's misery, buying the company for just $50 million, or 61 cents per share. Having seen its share price drop to just pennies on the dollar, the struggling Memory Pharmaceuticals faced an impending NASDAQ delisting on Dec. 3 and had just a few months of cash left in its coffers. The acquisition gives Roche full ownership to Memory’s nicotinic alpha-7 agonist program, including the Phase IIa drug R3487/MEM 3454 currently in Phase IIa trials for Alzheimer’s disease and cognitive impairment associated with schizophrenia, as well as the Phase Ia Alzheimer’s medicine R4996/MEM 93608. “This deal represents a 319 percent premium to the previous day’s closing price of $0.15, which we believe is fair given the current environment for small cap biotechnology valuations and Memory’s balance sheet,” wrote Rodman & Renshaw analysts Christopher James and Jason Butler in a Nov. 25 research note. Hmm. Wonder if Memory's private investors, which include MPM Capital and Great Point Investors, feel the same way. With just $20 million on its books and another $50 million from Roche, this can't be a money-making deal for investors. According to FDC-Windhover's Strategic Transactions database, Memory raised $80.3 million through a variety of financings, including an $11 million debt placement and a PIPE worth $32.7 million since it went public in 2004. According to the company's CFO, Michael Smith, the news for investors is even more grim: since its founding Memory has accumulated $250 million in deficits. We are tempted to sing a revised version of "Where have all the flowers gone?"--"Where has all the money gone?" Perhaps "Brother can you spare a dime?" is more appropriate.

Cephalon/ImmuPharma: Analysts such as Barbara Ryan at Deutsche Bank may wring their hands at Big Pharma's unwillingness to buy assets (Roche and J&J being this week's exceptions). But we aren't surprised to see more deals like tie-up between Cephalon and ImmuPharma announced this week. The terms of the deal give Cephalon an option to obtain exclusive worldwide rights to ImmuPharma's experimental lupus medication Lupuzor, currently in Phase IIb clinical trials, for a $15 million up-front fee. Cephalon--like King--fits what T. Rowe Price portfolio manager Kris Jenner believes is the profile of the industry's less obvious deal-makers. “There are lots of cash-rich companies short on product flow,” he argues in an upcoming IN VIVO feature. Moreover, while investors are clamoring for acquisitions, licensing arrangements that provide pharmas with valuable products and biotechs with cash to keep the lights on--could become the norm in today's tough business climate. Certainly, the Cephalon/ImmuPharma deal fits that model. ImmuPharma gets some much needed cash right away--as of June 30, the company was down to it's last £1.6 million according to its quarterly filings. (In July, the company announced a private placement worth £2.7 million, making its cash position marginally better. But still...) And if the drug works as advertised, ImmuPharma also stands to gain up to $500 million in various milestones. Cephalon, meanwhile, gets to defray the commercial and regulatory risks associated with buying 100% of Lupuzor until it is much further along in the clinic, when much of the scientific uncertainty about the product has been removed. If Cephalon exercises its option, it will assume all expenses for Phase III studies and beyond. "Our current cash position has created the opportunity to make this type of deal, which helps to position Cephalon and our pipeline for longer term growth," Frank Baldino, chairman and CEO of Cephalon, said in a press release announcing the news.

J&J/Omrix: Johnson & Johnson began its cash tender offer for biosurgical sealant specialist Omrix Biopharmaceuticals this week, valuing the company at $438 million or $25 per share. Omrix will operate separately and report through J&J’s Ethicon unit, which already sells Omrix’s fibrin sealant and thrombin-based product lines. Ethicon will also get a line of antibody-based immunotherapy products for immune deficiencies and various infectious diseases. Sales of those products hit $10.1 million in 3Q 2008, up 40% from the same period in 2007. J&J will take a $120 million charge to complete the deal, which could signal the beginning of an opportunistic J&J buying spree as the medical products giant looks to use its $14.8 billion in cash to buy up assets from companies pressured by shrinking valuations. Leerink Swann analyst Rick Wise calculates Omrix will add a tenth of a percent to 2009 top-line growth, as J&J weathers declines in Procrit and Cypher sales (5% and 3% of total 2007 sales, respectively) and generic pressure on Risperdal and Tomamax, which accounted for just under 10% of total 2007 sales. Although J&J already had a relationship with Omrix and the deal can be seen mainly as a low-risk way to leverage its sales force in new territories, it also shows the logic of Omrix’s development strategy of sourcing multiple products from human plasma (fibrin, thrombin, immune globulins). It stands in contrast to thrombin competitor ZymoGenetics, whose recombinant human thrombin Recothrom, a higher priced product, has been struggling to gain market share since its launch in early 2008. In the face of Recothrom’s troubles and a poor cash position, on November 21, Zymogenetics’ CEO Bruce Carter retired--Mark Ratner.

Just remember. You can get anything you want at IN VIVO Blog. Excepting Roger. Happy Thanksgiving!

Tuesday, November 25, 2008

No Black Box for Antiepileptics

It looks like the Food & Drug Administration will be requiring consumer medication guides and new warning language regarding the risk of suicidality associated with anti-seizure medications--but not a full-fledged "black box" warning.

The agency hasn't announced anything official on that score, but it has quietly adopted the new approach in the context of two recent approvals for new anti-seizure medicines. In case you missed it, "The Pink Sheet" has the full story.

An FDA advisory committee recomended against a black box warning in July. But in the current drug safety climate, and especially given the politically charged interest in suicidality associated with a whole host of products, it looked like a close call whether the agency would in fact follow that advice.

That sounds like good news for some big brands, including Pfizer's Lyrica, J&J's Topomax and Cephalon's Gabitril. (Click here to see all the products affected by the safety review.)

Monday, November 24, 2008

FDA Commissioner Search: Finding Kessler’s Kessler

Former FDA commissioner David Kessler has the perfect person in mind to be the next head of the agency: (1) an MD (2) with a broad background in both foods and drugs (3) who is a Washington veteran and (4) has experience managing a 10,000-person organization.

Sound familiar? It should, since that is essentially Kessler’s curriculum vitae.

Kessler received his medical degree from Harvard. As FDA commissioner under the Bush I and Clinton Administrations, he took on Big Pharma and Big Food—as well as Big Tobacco. As a former head of FDA, he is a familiar face inside the Beltway and has obvious experience managing a government agency.

We’ve speculated that Kessler could make a return visit to the FDA commissioner’s office, and we’ve also observed that after many spending many relatively quiet years as an academic—first at Yale Medical School, and then at the University of California-San Francisco—he’s been pretty outspoken recently about what’s wrong with FDA.

But is he interested in the job? As reported in this week’s issue of “The Pink Sheet”, the answer to that question appears to be no—but not enough of a no to shake the suspicion that it might really be yes. When asked if he’d be interested in taking over FDA for the Obama Administration, Kessler shook his head no. “That was an historic period,” he said. “I don’t know how we’d do it again.”

OK, so we’re not taking him off our lists quite yet. But if it isn’t Kessler himself, then who is Kessler’s Kessler? Here’s a snapshot of his picks and pans for the job, as conveyed during a recent event hosted by the public relations firm Fleishman Hillard:

Mike Taylor: “My deputy in policy [at FDA]; went to run [the Food Safety and Inspection Service]; probably the best food safety person in the country but not a doc. You may have to go for the first time with a non-doc.” [One of our observant readers pointed out that there is precedent for at least one non-MD who served as commissioner in the modern era: Jere Goyan. He was a PhD pharmacist.]

Bill Schultz (Zuckerman Spaeder): “Probably as knowledgeable as anyone on FDA. Real pro, but again not a doc.”

Josh Sharfstein (Baltimore City health commissioner): “On Waxman’s staff; worked for me; Baltimore public health commissioner; hasn’t run anything quite as big as FDA.”

Steve Nissen (Cleveland Clinic cardiologist): “What does he know about foods? What does he know about running Washington? Has he been there before?”

Of course, we’re still a long way from hearing anything definitive about the FDA commissioner—president-elect Obama’s formal announcement of Tom Daschle as HHS secretary is still pending, after all. Until then, we’ll keep on speculating.

While You Were Thawing Your Bird

IVBlog Public Service Announcement courtesy of this blogger's mother: "If you are buying a frozen turkey, make sure you have 4 days to defrost it. It takes almost 4 full days to properly defrost an 18 lb. frozen turkey. I got mine today [Sunday] and put it in the garage. Love, mom."

We're assuming garaging the bird is optional considering it's been pretty cold in a lot of places, and our own bird is in the fridge (and in any case we take no responsibility for mom's accuracy, but her turkey is usually pretty damn good). Of course you could always get a fresh turkey, but in this economy?

On to the weekend's news, and Monday's questions: Has the much-talked-about wave of M&A begun to crest? How much cash will US taxpayers spend on Citigroup? Will she or won't she? Was "Chinese Democracy" worth the wait?

Anyway, while you were installing some Cabinet:

  • Israeli business paper Globes is reporting this morning that Johnson & Johnson is acquiring Omrix Biopharmaceuticals for $27/share, or $465 million (a nearly 70% premium to Omrix's pre-rumor-inflated price of last Thursday). J&J's Ethix distributes Omrix's surgical sealant Quixil/Crosseal in Europe and North America and the acquisition has been rumored for some time. No confirmation from either player, so far. 7AM Update: Confirmed
  • Speaking of birds, good news for falcons of all stripes this weekend (Eagles, of course, fared less well). According to the AP, "Thunder and Lightning carried the Atlanta Falcons to an impressive win Sunday in a game they couldn’t afford to lose in the NFC South," as the Falcons drubbed the Carolina Panthers 45-28. Ooh, stormy. Also on Sunday, Peregrine Pharmaceuticals' anti-phosphatidylserine (anti-PS) antibody bavituximab showed further potential as a broad-spectrum antiviral drug, as a paper published in Nature Medicine described its potency in animal models of cytomegalovirus and Lassa fever virus. In other news '80s drama Falcon Crest is poised to return to your screens and upon further review, the Maltese Falcon was actually REAL. OK, we made those last two up.
  • NicOx's final Phase III study for its naproxcinod osteoarthritis hopeful hit all three co-primary endpoints; a planned pooling of blood-pressure data from all three studies (the first two in OA of the knee, this third one in OA of the hip) is ongoing with results expected "in the coming weeks." Also expected before the end of the year are results from a second abulatory blood pressure monitoring study--the first reported a few weeks ago.
  • You thought owing money to your loan shark "Junior" was tough? One of many cash-crunched and market-trampled biotech companies, the antiviral specialist Panacos Pharmaceuticals owed $20mm to Hercules. We're talking Zeus' son here, people. All is repaid now, though. Phew.
  • Philips is cutting 5% of its health care workforce, or 1600 employees. This move--spurred by the crappy economy and a drive to cut costs--comes after the Friday acquisition of India's Meditronics, an X-ray systems specialist, for an undisclosed sum.
image from flickr user Jan Tik used under a creative commons license

Friday, November 21, 2008

DotW: Prozac Nation

Even as the country debates the 44th president's emerging administration and the rise of Waxman as powerbroker come signs that a financial winter is upon us: plunging stock market prices and a frozen credit market continue to wipe out the gains of the last decade.

At a time when Citigroup's stock is in free-fall, it's not surprising that one outfit posting positive second quarter profits is foodmaker H.J. Heinz: in these scary times, mothers and fathers can feel good about feeding their children a home-cooked meal that also includes a cheaper vegetable option: ketchup.

It's been a grim week for the biopharma industry too. In an effort to improve productivity, AstraZeneca announced the closure of plants in Sweden, Belgium, and Spain and the redundancy--sounds so much better than "lay-off"--of 1400 workers. Wyeth also slimmed down, eliminating 300 jobs at manufacturing plants in an effort to reduce it's 50,000-person global workforce by 6%.
Meanwhile, Amgen and it's partner Takeda suspended trials of cancer drug motesanib, while reports linking Genentech's Avastin to blood clots have emerged.

But pharma's troubles continue to pale compared to some of its biotech brethren. A new report by Bloomberg notes that five biotechs have sought bankruptcy protection in the past month, fulfilling a prediction that Alta partner Ed Hurwitz made at BIO Investor Forum in late October: "This environment is not going to allow us to perpetuate the zombies."

Not quite walking dead, a number of companies announced restructurings this week in an effort to conserve cash: XTL, Metabasis, CombinatoRx and Vical join the growing list of the hard-done-by.

You can add Elan to that list as well. The biotech continues to struggle to sell its drug delivery unit. Though numerous private equity players have signaled interest, their inability to get financing makes the deal unlikely to happen near term, CEO Kelly Martin said at this week's Thomson Reuters Health Summit. The company's stock price has dropped 80% since July on concerns of slowing Tysabri sales and questionable bapineuzimab data and the clock is ticking on the company's $1.7 billion in debt, much of which comes due at the end of 2011.

It's enough to drive this blogger to better living through chemistry--a new report finds all antidepressants are created equal, so at least there's a cheaper generic alternative. (More money for retail therapy.)

In the meantime, we have an even more cost-effective solution: your weekly dose of sunshine--with a modicum of snark to cleanse the palate (Did we mention it's free?)

Purdue/Infinity: Just how bad are things these days? Bad enough that "extending the runway" a year or two isn't good enough. This week comes news that at least one forward looking company, Infinity, is looking to reprise the Roche-Genentech deal, securing funding out to at least 2013 in return for limiting itself largely to the US market. Indeed, the Purdue/Infinity tie-up announced Thursday wins our award for most creative --and complicated--deal of the week. Under the terms of the global joint development and commercialization agreement, Purdue' Pharmaceutical Product's European affiliate, Mundipharma, gains access to Infinity's entire currently unpartnered oncology-focused discovery and development pipeline for an initial term of three years, with options to extend for two additional one-year terms. As part of the deal, Mundipharma will pay all of Infinity's R&D expenses until at least the end of 2013. Costs associated with Phase III studies beginning in 2014 and beyond will be split equally. Importantly, Infinity retains US commercialization rights to its oncology compounds, paying Mundipharma a double digit royalty on US sales. In return, Mundipharma gains rights to these programs ex-US and pays Infinity a commensurate double-digit sales royalty. As Infinity CBO Adeline Perkins noted in our Pink Sheet DAILY story, "It's a beautiful model of how larger, better-capitalized companies can work with smaller discovery and development biotechs to enable them to flourish" while at the same time tapping into and capitalizing on what makes those more nimble firms successful. We like Infinity science a lot -- we've got a lot of time for CSO Julian Adams, discoverer of two marketed drugs (an HIV drug from Boehringer and Millenium's Velcade). But we also know that Infinity got that rare partner -- a rich private company. A public one might have liked the science just as much but wouldn't have wanted to take the P&L hit from what may be a commitment of $400 million or more in funding. But the Sacklers, who own Purdue, don't give a damn about showing investors EPS growth -- they've got plenty of cash flow and far more interested in cutting their tax bill while positioning Purdue and Munidpharma for what may be a break-out future in oncology.

Archemix/NitroMed: The downward-spiraling economy is also setting the stage for more reverse mergers. Just weeks after the Cardiovascular Systems/Replidyne announcement, comes news of a tie-up between the innovative, privately-held aptamer-focused biotech Archemix and NitroMed, a specialty pharma that made big news by developing the combination heart failure product BiDil. Despite its better efficacy in African American patients, BiDil has proved a commercial disappointment; in late October, the company announced it had sold the business to JHP Pharmaceuticals for $24.5 million in cash and additional payments for product inventory, setting up essentially a Nasdaq-traded cash shell ripe for a reverse merger. Competition for NitroMed's estimated $35 to $40 million in cash was reportedly fierce, but Archemix ultimately won the day. As part of the deal, which is still subject to approval by the SEC and both biotechs' shareholders, Archemix's current backers will retain 70% ownership in the new firm, which plans to apply for listing on Nasdaq under the symbol ARCH and to carry the Archemix name. Curiously, Errol DeSouza, Archemix's CEO will not be taking the helm of the newly formed firm; instead NitroMed's current President and CEO Kenneth M. Bate will hold those same titles. (DeSouza will remain on the company's board, however.) With a number of Big Pharma partnerships but no marketed products--Archemix's most advanced drug is currently in Phase II--the biotech has struggled to gain traction despite the industry's growing interest in large molecule-based platforms. Private investors, which include SV Life Sciences, Atlas Venture and Prospect Venture Partners, have sunk more than $100 million into the company in two large private financings. With the IPO markets frozen shut, Archemix's backers had two choices. They could nurse the biotech baby with additional capital infusions until a pharma proved willing to buy it for some generous mark-up. Or they could reverse merge the company with a public shell in the hopes that positive clinical news--potentially including an approved product--would drive up the company's stock price and give them an exit. According to Michael Ross, managing partner at SV Life Sciences, because all the unwinding of the NitroMed assets "has been done extremely well by the original NitroMed investors," the reverse merger was the best way to access a chunk of non-dilutive cash. The newly public Archemix is estimated to have approximately $55 million to $60 million in cash and equivalents when the deal closes some time in the second quarter of 2009.

United/Lilly: Also this week came news of a deal between United Therapeutics and Eli Lilly for US commercialization rights in pulmonary arterial hypertension to the pharma's tadalafil, better known as the erectile dysfunction drug Cialis. The deal, which is by no means chump change--United will pay Lilly $150 million up-front--is something of a head-scratcher. Cialis is currently under regulatory review by FDA, as well as authorities in Europe, Canada, Mexico, and Japan for this indication and is considered low-risk for a complete response. Moreover, as Lilly increasingly moves in a specialist direction, marketing Cialis for PAH would seem like a natural fit with its global strategy. Indeed, that's the approach Pfizer has taken with its own competitor, another phosphodiesterase-5 inhibitor, Revatio (sildenafil), approved earlier for ED as Viagra. It's certainly not a resource question for Lilly--the Indianapolis pharma has the reach and resources to market the product in PAH if it wants to. Rather it seems a question of focus--and with the company's recent purchase of ImClone, that focus is clearly elsewhere. There's no denying the deal--albeit expensive--gives United some breathing room in terms of its own pipeline. In a same day announcement, United revealed news that Phase III studies of its own oral drug for PAH, treprostinil, failed to meet clinical endpoints. In a conference call detailing the news, CEO Martine Rothblatt insisted that United has "more than compensated for the delay in [approval of] oral treprostinil" with the Lilly deal. Investors hammered the stock, sending United's share pirce down 32% on Monday before the opening bell.

Surprise! Drug Approvals Increase In 2008

Missed user fee deadlines. Multiple cycle reviews. A regulatory posture defined by the phrase “Safety First.” Complex new legislation. Understaffed, overworked review divisions. A hostile Congress eager to second-guess any and every decision. Divergent viewpoints built into the review process. Demands for more advisory committees with fewer conflicts of interest.

No wonder it is harder than ever to get drugs through FDA.

Maybe not.

The approval of Eisai’s antiseizure medicine Banzel (rufinamide) on November 14 marked a quiet milestone for FDA’s Center for Drug Evaluation & Research, the group charged with reviewing all new drugs and most therapeutic biologics: it is the 18th new molecule approved by the agency this year.

That matches the full year tally for 2007, and there are still six weeks left in the year. [UPDATE: With two approvals in the 24 hours since this was first posted, FDA is now at 20 new molecules for the year.]

Don’t run out and buy all the champagne quite yet: remember, 2007 was the single worst year for new drug approvals in a quarter century. Matching that performance is hardly cause for a parade.

But it is good news nevertheless. As recently as July, it looked like FDA might be on track for yet another new low in output: with only six approvals in the first half of the year—one fewer than the first half of 2007.

Well, the pace has picked up (as we predicted it would). And with at least 10 more applications still pending with a shot at approvals this year, it may turn out that 2008 is the best single year for approvals since 2004. (CDER approved 36 novel products that year. Don't expect miracles: five or six more approvals maybe, but 18 more approvals in the next six weeks is out of the question.)

Even a really strong finish by FDA in 2008 wouldn’t mean that much in the grand scheme of things. After all, 2004 was just a one-year blip in what has been a prolonged drought in new product approvals—at least compared to the 1990s. What industry needs is not one big year, but a long term, sustained increase in the output of new products coming to market.

Still, the thought that FDA will end up approving more drugs this year than last offers a much needed sign of hope for the biopharma industry. Maybe—just maybe—the new era in drug regulation ushered in by the FDA Amendments Act of 2007 won’t be so bad after all.

Industry accepted FDAAA as a tough but necessary trade, hoping that the tighter safety regulation would give FDA more confidence to approve drugs that would otherwise languish at the agency. There’s no question about the tougher regulation: as “The Pink Sheet” reported, about one-third of new molecule approvals have a formal Risk Evaluation & Mitigation Strategy attached to them, and more than half have mandatory post-marketing study requirements.

Its impossible to say for sure whether the other half of the trade will come to pass, but at least the trend is in the right direction.

In fact, Banzel may be the perfect emblem for the year 2008. It was a multi-cycle review (the application was first submitted almost exactly three years ago); it slipped passed the final review deadline (Eisai’s resubmission was due for action on Aug. 29); and the approval carries with it a formal REMS requirement as well as some mandatory post-marketing trials.

But it is approved for marketing. And, despite everything, that is something that seems to be happening a bit more often this year than last....

Thursday, November 20, 2008

Arguing by Analogy: What Pharma Can Learn from the Car Business

We’re well aware that arguments by analogy are often fallacious but it’s been difficult for this blogger to watch the CEOs of the American automakers plead for a government loan and not see important analogies between what led them to the witness table in front of the Senate Banking committee and current issues in the pharmaceutical business.

Three basic points:

1) Thanks to their own inefficiency, shortsightedness and inability to deal with a labor and infrastructure problem largely of their own making, Detroit carmakers built themselves to supply a market, gas guzzling cars, that is disappearing. It’s difficult to believe that the same management and union groups which got them into this mess are going to be able to do the radical restructuring that will get them out of it.

2) A nimbler set of competitors ran straight through the hole in the Detroit defenses to create markets for small fuel-efficient cars, particularly hybrids, that should have been Detroit’s by right but which they by and large ignored or relegated to fig-leafing SUVs into merely moderate gas hogs.

3) Granted GM, Ford and Chrysler can make it through the next year (GM’s got roughly $60 billion more in debts than in assets; it’s burned through $9.7 billion in cash in the first three quarters of 2008 and, with about $16 billion cash remaining, will be flat bust before 2009 is over) the big hope is technology – in particular, the electric car (GM’s Volt).

Big Pharma has likewise shackled itself to a market – primary care -- that most of us know in our gut, and IMS can demonstrate with data, is shrinking. Primary-care medicines still make lots of money; SUVs don’t. But given the number of new primary-care drugs that have fallen out of the clinic on their own, fallen afoul of regulators, or been yanked off the market or sharply restricted in their use (e.g., Galvus, Zelnorm, Avandia, Pristiq), and the number of drugs that are losing patent protection by 2012, it’s not got long to thrive. If you call this thriving.

Big Pharma’s versions of Detroit’s nimbler competitors: companies who set themselves up to go after specialist markets – Gilead, Genzyme, Celgene, Amgen, Genentech and Biogen Idec (indeed, Gilead and Celgene started out with molecules Big Pharma could’ve had). First mistake: Big Pharma’s blindness to the value of niche markets (blind because they weren’t structured to take profitable advantage of them, self-mandated to find drugs that could support primary-care commercial and development organizations rather than new medical needs). Second mistake: unwillingness to adopt a new technology – protein therapeutics, a nice parallel to Detroit’s blindness to hybrid engines.

As for electric engine technology: think biomarkers. As with batteries, the technological hurdles to an effective companion diagnostic are gigantic; so are the regulatory and business challenges. So far, we haven’t known enough to really make effective therapy-directing diagnostics. But just as electric cars could transform the worldwide car market (and with it, the worldwide political landscape…without a war), markers could allow drugmakers (or whoever controls the biomarker) an almost incontrovertible argument against recalcitrant payors who, by and large, now determine the success of a drug’s launch.

You still hear arguments that Pharmas shouldn’t pursue biomarkers because they’ll limit markets. You hear even more arguments about the need to continue to focus on primary care. What if we come up with another Januvia, they say? We say: if you come up with another Januvia, great. It ain’t all that tough to hire a sales force, if and when you need it.

It all sounds a little bit like that other notion we’re hearing about, even as the car makers beg Congress for a bailout: now that gas prices have tumbled back nearly to where they’d been before things went crazy, maybe the car companies can get by on the old strategy – still appealing to some apparently unquenchable American desire to drive cars too big for their own good?

Not the right lesson. For the car companies or Big Pharma.

HHS Secretary and the FDA Commissioner

Everybody's talking about the selection of former Senate Majority Leader Tom Daschle as the next HHS Secretary. To read our take, check out The Pink Sheet DAILY. Now that the Daschle pick has been made, everyone's attention is turning to FDA Commissioner. We've given you our list of initial possibilities here and here and here.

But we wanted to use this space to make a nuanced, but important, point about what say the HHS Secretary may have on the commissioner pick. It could be very little.

In addition to Senate HELP Committee Chairman Ted Kennedy, and a few other prominent Senate leaders, the pick may come from just a few internal White House advisers. One former senior White House adviser told us this not too long ago:

"Whenever the HHS Secretary made it clear they didn't want to get locked out of the FDA commissioner process, we made sure to lock them out." White House advisers, this person said, would even literally lock their notes inside a safe when they were done for the night to ensure there were no leaks.

In the Bush White House, Assistant to the President for Presidential Personnel Clay Johnson was critical in the commissioner choice, conducting the interview process. Johnson is now OMB Deputy Director for management.

Daschle may have tremendous influence on who the next commissioner is, or even make the choice himself. The point, though, is he also may not have any say at all, or only a marginal one.

We just want to urge caution in assuming Daschle will make the pick.

Wednesday, November 19, 2008

Two Billionaires and Health Reform

What do two billionaires and reforming the American health care system have in common?

We're not sure. But we're going to get a little TMZ on you here.

The Brookings Institution's Engelberg Center for Health Care Reform hosted a Nov. 17 meeting focused on the various aspects of reforming the health care system in 2009. The series of panels addressed health care delivery, reimbursement reform, political prospects and mobilizing consumers.

Some of the leading minds and players attended and offered their thoughts on what's next and what it will look like: Senate Finance Committee Chairman Max Baucus, Senators Richard Burr (R-NC) and Sheldon Whitehouse (D-RI), former HHS Secretary Donna Shalala, ex-FDA Commissioner/CMS Administrator Mark McClellan, Harvard Business School's Michael Porter, and AHRQ's Carolyn Clancy, to name a few.

While we were watching the lively debate onstage, we couldn't help but notice a "Hey, I know that guy from somewhere but where?" person walk by us to his seat. It was Nike founder Phil Knight. While wondering what Phil Knight could possibly be doing at an Engelberg briefing on health reform with the wonkiest of the wonks, another "Hey, where do I know her from?" person brushed by us. Oh, it was just Teresa Heinz Kerry catching a session on "Policy Reforms to Improve Health Care Delivery."

Okay, one billionaire in a room of 75 people is fine, but TWO billionaires? That's a bit much. Turns out Brookings was holding their trustees meeting this week, which is why they happened to catch the meeting. What was interesting to us was they stayed for almost the entire 4-hour event and looked pretty interested in the discussion from what we could gather.

We don't know what to make of the fact that two billionaires sat through and were engaged in a half-day policy meeting, but we figure it's got to mean something, right?

Next week on the IN VIVO Blog, we'll tell you about Brangelina's secret baby and whether Britney and Lindsey are planning a supergroup of bad singers.

Monday, November 17, 2008

A Wolfe In Wolf's Clothing

No one expects Sidney Wolfe to sit on his hands at an FDA advisory committee meeting, and at his first outing as a permanent member of the Drug Safety & Risk Management Advisory Committee, he didn’t disappoint.

During a two-day meeting last week to consider the approvability of two abuse-resistant pain medications, Wolfe took a few minutes to grouse about one of his favorite topics, direct-to-consumer advertising, and specifically Purdue’s $600 million fine over misleading advertising and promotion of OxyContin. Here’s what he said:

“The gorilla, or donkey or elephant in the room is advertising and promotion. If OxyContin was that dangerous ... maybe it would be off the market. The number-one culprit—and the number two, three, four, five, six and seven—and the reason for the $650 million penalty was misleading advertising and promotion.”

Wolfe also couldn’t help but take a dig at the two products up for approval decisions: Alpharma’s abuse-resistant form of morphine, Embeda, and Pain Therapeutics’ abuse-resistant form of oxycontin, Remoxy. (Neither drug won kudos from advisory committee members; you can read our coverage on those meetings here and here).

“Any company that wants to develop...a product that is novel and has significant benefits over existing products—something I haven’t seen over the last couple of days—is going to spend a huge amount of money advertising and promoting,” Wolfe said.

It’s true that advisory committee members sometimes go off the reservation on issues like pricing and insurance coverage. And we don’t necessarily disagree with what Wolfe is saying—we’ve also suggested that industry take a hard look at DTC advertising and whether it’s really worth all the potential political and legal headaches.

But for companies with products slated to go before Drug Safety & Risk Management Advisory Committee—and given the ubiquitous nature of REMS, there will be many—those are the type of comments to expect out of Wolfe. In the case of Embeda and Remoxy, his comments only reinforced the direction the committee was headed in anyway. That may not be the case next time.

What’s next for Wolfe? The next meeting of the Drug Safety & Risk Management Advisory Committee is two-day discussion on the safety of long-acting beta agonist inhalers in December. That’s big-name products like GSK’s Advair, AstraZeneca’s Symbicort and Schering-Plough’s Foradil. Stay tuned.

While You Were Raking Leaves

An uncharacteristically quiet autumn weekend for industry that we hope gave you the opportunity to get outside and enjoy the characteristically peaceful sounds of plastic tubes strapped to roaring V6 engines.

It was better than staying in to watch football anyway. But if you were that unlucky: while you were watching your team tie (in the ugliest way) ...

image from flickr user A-wix used under a creative commons license

Friday, November 14, 2008

DotW: Change We Believe In

President-elect Barack Obama and his wife Michelle visited the White House this week: an event so closely tracked by the press that it was possible to immortalize the license plate numbers of the SUVs in the motorcade. (Could it be that even FOX news believes change is good?)

Meanwhile, the Dow Jones industrial average came roaring back yesterday, jumping 550 points after buyers swarmed back into the Standard & Poor's 500 index, the indicator most watched by traders. (Okay, we confess: descriptives such as "roaring" and "muscular" still seem a misnomer when the wide-scale sell-off earlier in the week wiped out roughly $1 trillion in shareholder value.) Still if Wall Street believes the market has finally priced in enough bad news, that's a change this blogger will accept--if not believe in.

Just don't ask Detroit. Or a number of biotechs, for that matter. Anecdotal evidence continues to amass illustrating just how tough it is for smaller companies in the biopharma industry. (See below.) Stem cell play MicroIslet joined AtheroGenics in filing for Chapter 11 this week (At least it wasn't Chapter 7.)

Pain play Anesiva announced its second, painful restructuring since September, reducing head-count and cutting the company burn-rate after its novel formulation of capsaicin, Adlea, narrowly missed a clinical endpoint. Other companies with restructuring news include Neurogen and Javelin Pharmaceuticals. Meanwhile, Pharmos revealed it's in non-compliance with NASDAQ listing requirements and Targeted Genetics has big changes at the top: after disclosing last week that the company is running out of cash, CEO H. Stewart Parker and CSO Barrie Carter announced their resignations.

Even larger biotechs are not immune. Concerned about the slower growth of its GLP-1 franchise Byetta, Amylin announced cost-cutting moves designed to reduce 2009 expenses, including the termination of 340 San Diego-based employees.

But before the whining commences, perhaps companies should adopt some of the changes put in place at BMS, which yesterday at the Credit Suisse Healthcare conference in Phoenix outlined steps to improve its cash flow by $750 million to $1 billion by 2011. And the measures are far from rocket science. Newly installed CFO Jean-Marc Huet is going back to basics, strengthening the company's cash position by better managing inventory, receivables, and payables.

AstraZeneca, meanwhile, is over the moon about the JUPITER trial results. Could this good news for AZ's Crestor spark the return of a bullish primary care market? That's change Big Pharma would like to believe in.

Here at IN VIVO Blog we know change can be hard. (Just look at the safe sartorial choices President-elect Obama has made in his transition from campaign mode to casual Friday.) And painful, as evidenced by the new look sported by Washington Wizard's point guard Gilbert Arenas.

That's why we're here for you week in and week out...

Affymetrix/Panomics: GeneChipper Affymetrix announced on Tuesday that it had acquired the private assay/consumables company Panomics (née Genospectra) for $73 million in cash. The deal brings Affymetrix a stronger position in “the high-growth validation and routine-testing market segments,” according to the Affy release. The deal unites two Alejandro Zaffaroni-related firms; the prolific investor and namer of biotechs was the founding investor of Genospectra, which acquired Panomics (and kept its name) in February 2006. The 8-year old Genospectra/Panomics has raised at least $56 million from VCs including Frazier Healthcare, Bay City Capital and Novartis BioVentures, among others, and as such this deal isn’t going to count among anyone’s top multiples--Chris Morrison.

Eisai/TorreyPines: Cash-hungry TorreyPines Therapeutics announced Monday that it had sold its Alzheimer’s disease research program to Eisai Co. for $1.5 million. The program—on which the two firms had collaborated since 2002—focuses on the discovery of targets using whole-genome family-based association screening. TorreyPines is sitting on less than a year’s worth of cash--approximately $14.3mm at the end of September compared with a burn rate of $5.4mm in the last quarter--with which to push forward its Phase II migraine project, tezampanel, and the rest of its development pipeline. The company also this week named a new chief executive, Evelyn Graham, the group’s former COO who became acting CEO in September when Neil Kurtz left the biotech to become CEO at the long-term care operator Golden Living. TorreyPines appears to be on its last legs: it has repositioned itself as a development-only firm but the market—which values the company at a mere $4.4 million—isn’t buying the turnaround. Earlier in October TorreyPines jettisoned some other research assets in a deal with Abraxis subsidiary Cenomed and we suspect further disposals can’t be far behind--Chris Morrison.

Daiichi/ArQule: Eisai wasn't the only Japanese pharma acting opportunistically this week. Daiichi-Sankyo signed a deal with ArQule Nov. 10 that gives the biotech important non-dilutive funding as well as validation for its kinase inhibitor discovery platform. In exchange for broad commercialization rights (worldwide excepting Japan, China, Taiwan and South Korea) to ArQule's lead compound, the Phase II oncologic ARQ 197, Daiichi will pay $75 million in up-front funding along with up to $560 million in potential milestones. In case you were wondering, ARQ 197 is a c-Met inhibitor currently in mid-stage clinical trials for the treatment of non-small cell lung cancer and microphthalmia transcription factor-associated tumors such as clear cell sarcoma. In addition, the two companies have established a broader research collaboration to identify novel kinase inhibitors using ArQule's proprietary AKIP platform. As "The Pink Sheet" DAILY reports, ArQule CEO Paulo Pucci called the deal "fundamentally transforming" and said it would make the biotech "a competitor in oncology." (Um, yeah.) There's no doubt, however, that the up-front adds to the biotech's $136.3 million cash cushion and helps off-load some expenses and developmental risk associated with ARQ 197. Some, but not all. Daiichi isn't willing to shoulder all of the clinical costs of the product--ArQule will share in Phase II and Phase III development costs, with ArQule's Phase III costs covered by milestone payments from Daiichi.

Novartis/Xoma: Joining the ranks of Torrey Pines, Targeted Genetics, and Amylin, Xoma also announced belt-tightening moves this weeks, including cashing in on programs partnered with Novartis and redoubling efforts to monetize its bacterial cell expression technology. “We are watching every dollar,” said Steve Engle, CEO of the Berkeley, Calif.-based antibody developer in an interview with "The Pink Sheet" DAILY. As Xoma refocuses its research dollars on XOMA-052, an interleukin-1b inhibitor for Type 2 diabetes, it's had to revise a research collaboration inked in 2004 with Chiron-- before that biotech’s acquisition by Novartis--around therapeutic antibodies for cancer. Initial terms of the deal required the two companies to share research and development costs 70-30, with Chiron (now Novartis) taking on the lion’s share of the expenses, especially related to HCD122, a fully human monoclonal that targets CD40 now in early clinical trials against lymphoma and multiple myeloma. But after a painful reality check, Xoma is relinquishing its 30 percent stake in the product to Novartis in exchange for a $7.5 million payment plus potential milestones of up to $14 million. Compared to other recent licensing agreements in the oncology space, that’s a paltry sum. But Xoma wasn’t in much of a position to bargain since Novartis already owned the majority of the product. To sweeten the deal, Novartis agreed to pay double-digit royalties for two ongoing programs, including HCD122. Also, it will provide Xoma with options to develop or receive royalties on four yet-to-be-selected additional programs.

Big Diff May Lead to Big Deal

Talk about good timing.

On November 10th Optimer Pharmaceuticals announced results from a Phase III study of its OPT-80 antibiotic that suggest it is as good or better at treating the dangerous diarrhea-inducing C. difficile infection than the current standard for moderate and severe infections, oral vancomycin (i.e. ViroPharma's Vancocin, net sales expected to be $225-245mm this year).

On November 11th the Association for Professionals in Infection Control and Epidemiology (APIC) released a survey claiming that more than 1% of all patients are infected by C. diff during a hospital stay. (About 7,000 daily, or a 6.5x spike compared with previous estimates.)

Our full coverage of OPT-80 and the scourge of C. diff is at the Pink Sheet Daily, yesterday and today.

The Monday afternoon announcement did wonders for Optimer's market valuation--doubling the worth of the company to about $270 million--though that figure retreated somewhat as the week wore on.

But more importantly, the data will likely put Optimer in a strong partnering position. It might even put them--given the beating that many biotechs have taken in the market--in a prime takeover position for those bigger biotechs and pharma companies that stayed in the antibiotics space when it wasn't in vogue and are now reaping the rewards.

In any event it should keep them from having to access capital at overly expensive prices; the firm has an open shelf registration and can draw on that while its stock is buoyed by this week's news.

Whether that'd be enough cash to see its compounds through registration and build a US hospital sales force (at 100-150 reps) as is the company's plan, who knows. Regardless, between OPT-80 and a second project in Phase III for travelers' diarrhea (prulifloxacin) with results due in next year, Optimer is optimerally well positioned.

image from flickr user red5standingby used under a creative commons license

Thursday, November 13, 2008

Baucus Takes Pole Position in Upcoming Health Reform Debate

Senate Finance Committee Chairman Max Baucus is ensuring himself a prominent and visible seat at the health reform table with a white paper outlining his legislative proposal.

The white paper, “Call to Action: Health Reform 2009,” was unveiled on Nov. 12 and represents a culmination of discussions both in Congressional hearing rooms (10 hearings including one scheduled for Nov. 19) and behind closed doors with key stakeholders.

“The need is so great, we have to act now. There is no choice,” Baucus said during a same-day press briefing on why the economic situation should not delay acting on broad—and expensive—health reforms. “If we wait, the costs will grow.”

Baucus said the next administration and Congress will not repeat two mistakes made by the Clinton Administration in reforming health care: waiting too long and conducting the process from the top down.

In other words, Congress will want to show that it will act quickly after the Jan. 20 inauguration and key lawmakers and committees will be heavily involved in the legislative process from the very beginning.

The Baucus plan is a clear play by the Montana Democrat to get out in front of the health care debate ahead of a number of Democratic heavyweights looking to make health care their signature issue. The Finance Committee has jurisdiction over Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), and all tax policy changes including those affecting health care.

There’s a strong sense among lawmakers, industry representatives and policy wonks that the first term of an Obama Administration is the time to move on sweeping health reform, with universal health coverage for all Americans the crown jewel of Congressional efforts.

Carving Out A Position

But two key questions are making the rounds in Washington: 1) What will the final plan look like? and 2) Who will get credit?

President-elect Barack Obama touted health care for all as a legislative priority closely behind an economic stimulus plan for the middle class during his campaign. Sen. Hillary Clinton (D-NY) made universal health care the cornerstone of her domestic agenda during her bid for the White House. Clinton led the failed effort to create one federal health care system in 1993.

During his speech on the final night of the Democratic Primaries in June, Obama singled out Clinton as a key figure in the fight for universal coverage. “You can rest assured that when we finally win the battle for universal health care in this country, she will be central to that victory.”

Senate Health, Education, Labor & Pensions Committee Chairman Edward Kennedy has been leading the fight for universal health coverage for decades and has made it his cause for the 112th Congress.

“This is the cause of my life: new hope that we will break the old gridlock and guarantee that every American, north, south, east, west, young, old , will have decent, quality health care as a fundamental right and not a privilege,” Kennedy said on the first night of the Democratic National Convention in Denver.

Kennedy has been working behind the scenes for months with physician organizations, patient groups, and insurers to craft universal health care legislation ready for introduction at the beginning of the next session.

The Baucus proposal, though, essentially cuts off the Kennedy legislation and steals some of the Massachusetts Democrat’s thunder. Still, Baucus says he plans on working with Kennedy and other leaders, naming Republicans Chuck Grassley (Iowa) and Michael Enzi (Wyo.). “I received a call this morning from Sen. Kennedy. It was a very complimentary call…I was truly touched.”

Those feelings may not last, however, as discussions heat up over what a reform bill will include and whether there will be two Senate bills or one. “I’m less concerned with that. I’m more concerned about getting the job done.”

The Baucus press briefing was a show of power for Baucus with a packed room of media attending, including every major national newspaper and more focused trade publications. The whitepaper was also previewed to the national press the day before in order for stories to show up in headlines on the front pages of mainstream newspapers.

The formal presser was followed by a backgrounder for press with a half dozen top Baucus health staffers. Immediately after the backgrounder, Baucus’ policy team was slated to meet with staff from other Congressional members to brief them on the plan and provide specifics on some of the more technical aspects of the white paper.

The Baucus Plan: Walking a Moderate Line

In jockeying for position among reform-minded Democrats, Baucus is carving out a moderate one as his own.

“Some people say the US should have a single payer system—I disagree with that,” Baucus said. The Finance Committee Chairman is casting his proposal as a moderate call for reform that blends private and public coverage to create a “uniquely American system” for universal health care.

Three examples of Baucus’ more moderate approach to reform:

1) The white paper establishes a low threshold of reporting physician relationships with medical product and drug manufacturers but doesn’t go as far as prohibiting gifts to physicians.

2) The proposal notes that the Medicare Payment Advisory Committee estimates Medicare Advantage (MA) insurers are overpaid by 13% more than if the same beneficiaries remained in the traditional Medicare fee-for-service program. However, Baucus calls for a more nuanced approach to MA payments in order to avoid “severe underpayments” by “reducing payments to high-use areas and increasing payments in low-use areas.”

3) The Baucus plan avoids discussion of drug price controls but does address Medicare Part D cost savings by bringing Medicare rebates for dual-eligible beneficiaries in line with the rebates states are able to secure under the Medicaid program, according to Baucus policy staff.

Priorities and a Mix of Ideas

The white paper bases reforms on three overriding principle: meaningful coverage for all Americans; insistence that any coverage expansion be coupled with higher quality care and cost savings over time; and an “absolute commitment” to eliminate waste and overpayments.

The Baucus plan would make health coverage immediately available for Americans between the ages of 55 and 64 years old and begin a phase-out of the two year wait for Medicare coverage for individuals with disabilities. The plan would also strengthen the role of primary care—a theme Baucus hit on multiple times during his remarks—and chronic care management, and increase investments in comparative effectiveness research and health IT infrastructure.

Baucus and his staff drew from ideas from a number of different sources in developing their comprehensive proposal. For example, Baucus policy staff say they had discussions with administrators of the Massachusetts universal coverage “Connector” plan, something Kennedy and his staff have been doing for some time.

The Finance Committee Chairman’s call for the creation of a national Health Insurance Exchange (HIE), which would sell and oversee the administration of coverage, was the centerpiece of Obama’s health proposal.

The Medicare Part D dual-eligible rebates reform plan is a key piece of legislation that House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) is planning to introduce.

Baucus allowed that certain elements would be implemented quickly, citing expansion of SCHIP, while others, such as HIE and the creation of a Comparative Effectiveness Institute, would take longer to phase in.

image detail from Penguin Classics's edition of Hazlitt's essays

Wednesday, November 12, 2008

Canadian Imports? Think Policy, Not Prescription Drugs

Election Day has come and gone, so once again it is time to handicap the prospects for so-called reimportation legislation—bills that would allow much broader importation of prescription drugs from Canada or other markets where prices are lower than they are in the U.S.

That has been a biennial topic for the last four election cycles, ever since bus trips to Canada burst on to the political scene to dramatize the high cost of prescription drugs in the U.S.

Since 2000, every national election has brought a push for action, but so far at least the borders remain closed to wholesale import of drugs from Canada. So it comes as no surprise to see reimportation on everyone's list of issues for industry to worry about heading into 2009.

But we think asking about the prospects of reimportation legislation next year misses the point.

First off, Congress has already enacted legislation that would allow widespread legal importation of drugs from Canada, as long as HHS Secretary certifies that the practice would be safe. Under President Bush, that certification has not happened, but at least in theory an Obama Administration could change importation policy with the stroke of a pen.

We don’t think that is going to happen.

Yes, we have read Obama’s website, which dutifully pledges to "lower drug costs by allowing the importation of safe medicines from other developed countries."

But we’ve also heard what one of Obama’s key health advisors, Dora Hughes, had to say on the subject at a recent generic industry trade conference: In light of the heparin problems, reimportation is just not that high a priority anymore. (You can read more about her remarks in “The Pink Sheet.”)

That also seems in keeping with the sense that reimportation has served its purpose for the Democratic party—a sense that seemed clear to us over a year ago.

Some of this relates to the odd political history of imporation: bus trips to Canada were always an odd national campaign emblem, but they made a kind of sense back in 2000. In that year, the Democrats saw an opportunity to make significant gains in the Senate by targeting a number of Republican incumbents who happened to be up for re-election in northern border states that year. So people like Maria Cantwell (Wash.) and Debbie Stabenow (Mich.) or even Hilary Clinton (N.Y.) all benefited from the national focus on Canadian imports. And once in Washington, they all shared an interest in advancing legislation.

Eight years later, look at the Senate seats that flipped to the Democrats. Virginia. North Carolina. Colorado. New Mexico. Oregon. Not a Canadian border in the bunch. Reimportation just isn’t the issue there. If anything, the danger for pharma is tighter regulation of trade, or even outright protectionism. (The one exception is New Hampshire, where former Governor Jeanne Shaheen brings a track record of drug cost containment to the Senate.)

Here’s the thing: importing drugs from Canada was never the point. Lowering US prices was.

That’s where the new Administration and the new Congress will focus their attention, starting with the unfinished business from the 2006 elections: price negotiation in the federal Medicare program. So if the Democrats want Canadian prices, they can get them--but they don't have to bother with allowing (and policing) wholesale imports, they can simply direct that the US government pay no more than the Canadian price for medicines sold in both countries.

We don't actually think that is how price negotiation will work at first; as we wrote here, Congress is more likely to start with benchmarking against the US Medicaid price for the same drug. But once Pandora's Box is open, its a safe bet that using Canadian prices as a point of reference will be on the table too.

And that's where industry might start to do some importing of its own--not of drugs, but rather of case studies in the impact of Canadian efforts at price controls on investment in that country.

Beyond that, its time to start gathering stories of how the Canadian health care system overall does and does not meet the needs of Canadians. Fifteen years ago, the US health care reform debate triggered a sub-debate about whether Canada's system does or does not work well for its citizens. That debate is certain to recur if and when the health care reform debate begins again in earnest.

So there will be plenty of cross-border trade in 2009--but in the form of a flow of ideas, not prescription drugs.

Tuesday, November 11, 2008

FDA Commissioner: Myths And Reality

Everyone wants to know who the next FDA commissioner will be, and we certainly have done more than our share to stoke speculation about the answer to that question. And we expect to do more of the same in the weeks and months ahead.

But before the frenzy gets entirely out of hand, we would like to offer a few rules of thumb about the commissioner search process.

(1) FDA May Be Your Top Priority, But It’s Not Obama’s

Just because the pharmaceutical industry considers FDA one of the most important positions in a new Administration doesn’t mean the transition team sees it that way.

In this climate, priority goes to economic posts (where the Securities & Exchange Commission is a more critical regulatory agency than FDA) and to Defense/National Security.

Even when the US is not at war or facing a financial crisis, FDA typically is way down the list of posts to fill. The Centers for Medicare & Medicaid Services usually is filled first, for example; with so much money under management by CMS it almost has to be.

And, in this Administration, when attention turns to health care appointments, the focus will be on health care reform teams as much as on agency appointments.

During the last transition, the first political appointment to FDA didn’t come until August, when Dan Troy was named chief counsel. As a Senate-confirmed post, commissioner takes longer—and in 2001 it took until nearly the end of 2002. Everyone hopes that long a delay can be avoided this time, but even with haste, there is unlikely to be a commissioner confirmed and on the job much earlier than 12 months from now.
(2) It’s Not Necessarily Obama’s Pick Anyway
There’s always some give-and-take between the White House staff and the new Health & Human Services secretary when it comes to filling the FDA post, and without knowing for sure who the HHS secretary is—and whether he or she sees FDA as a critical priority—there is no way to handicap that dynamic effectively.

And then there is the Kennedy factor. Historically, Ted Kennedy, the long-time chairman of the Senate Health Committee, has played a pivotal role in the commissioner selection process, holding veto power over any Republican selections and playing an even more direct role in the pick during Democratic Administrations.

However, Kennedy’s health may not allow him to play that role in 2009; if he steps down, his successor (potentially Maryland’s Barbara Mikulski) will certainly want some say in the process. But there may be a stronger voice for House members like Henry Waxman, whose staff has worked closely with the Obama campaign.

So no one can say for sure who will be involved in making the pick—which makes it hard to say who the pick might be.

So let’s face it: at this point, there’s a good chance the nominee will be someone no one has mentioned yet. Remember: Mark McClellan wasn’t even considered for FDA until after he’d already been nominated and confirmed for a different post in the Bush Administration.
(3) It Won’t Be An Insider
The biopharma industry would be thrilled if Center for Drug Evaluation & Research Director Janet Woodcock ends up as commissioner. Heck, the biopharma industry would be thrilled if she were President.

Don’t get your hopes up.

FDA is too plum a post to give to a career civil servant. There are too many people to reward and too few rewards to dole out to allow for that.

Even if the Obama team decided FDA is in such a state of crisis that they have to turn to an insider, the fact that Woodcock is so widely seen as industry’s top choice (like here) probably rules her out. Remember: the Bush Administration couldn’t get an “industry” pick at FDA. Why would an Obama Administration even want to try?

Woodcock could end up with the job nevertheless—but only if the outside choice (and maybe several outside choices) doesn’t make it through the Senate. And, as pleased as industry would be to have Woodcock running FDA, the prolonged uncertainty it would take before she really had a chance to get the job would be tough on the agency—exactly the outcome that industry wants to avoid in backing her for the post in the first place.
(4) It Might Be Nissen
Just as the perception that Woodcock is industry’s top choice isn’t going to help her get the job, the widespread suggestion that the Cleveland Clinic’s Steve Nissen would be the worst for industry doesn’t hurt him.

We have no idea if Nissen will end up at FDA—but as an Obama advisor he has already been vetted in case he is picked for some kind of government post. Maybe there is something in his background that rules him out, or maybe Obama, his HHS secretary, Kennedy, Waxman or someone else will want to go in a different direction.

But this we know: the opposition of industry won’t be the thing that keeps him out of the job.
(5) Nissen Might Not be so Bad After All
There’s no question that Nissen is unpopular with some in industry (like anyone who ever had anything to do with marketing Avandia or Vytorin).

But there are at least three reasons why industry might not be so bad off if he ends up at FDA.
First, as commissioner, Nissen can’t just lob grenades as products the way he has been in recent years. Sure, he might pull Avandia outright, rather than cripple it commercially—but as commissioner he also has to set some constructive public health agenda that doesn’t simply involve taking potshots at individual products.

Second, Nissen is not a drug safety gadfly at heart. Believe it or not, he wants to see industry succeed at developing innovative products. After all, he does drug development himself, and has spoken out in favor of products like Lilly’s prasugrel. As commissioner, you can bet Nissen would work just as hard to encourage the types of products and studies he likes as he would to discourage those he doesn’t.

Last but not least, there is the Kessler Effect: the last time a commissioner was appointed who defined himself by making enemies in industry, he also gave the agency the credibility it needed to establish accelerated approval and the user fee program. Kessler was never popular with industry, and drug companies celebrated his departure. But drug approvals have been in steady decline ever since. Coincidence or not, those were the good old days.

So happy speculating. Say, where is David Kessler anyway?…