“EMEA is not the FDA of Europe, and the FDA is not the EMEA of the United States.”
That’s how Richard Pazdur – the head of FDA’s Office of Oncology Drug Products – started off a panel on oncology regulatory initiatives at ASCO on May 30. “We recognize that there are different laws, different interpretations of existing laws and different cultural issues that can be brought into play in making regulatory decisions,” he added.
But with consistency, and transparency, in mind, the two regulatory bodies do practice openness. FDA’s entire oncology review team has monthly teleconferences with key EMEA officials. They go over pending regulatory actions, recent meetings with sponsors, proposed regulatory initiatives and even occasional staff exchanges (a regulate-abroad program?).
There is also a free exchange of documents – minutes from end of Phase II meetings, important regulatory letters. “Really the oncology program with this interchange has been one of the models that the FDA and the EMEA want to emulate in other therapeutic areas,” Pazdur said.
Still, Pazdur, who received a personal plaudit for his stewardship of cancer drug approval process with a career recognition award, kept honing in on the differences between the European regulatory system and the FDA process. The way Pazdur referenced some of those differences could constitute a wish list for additional authorities the FDAer would like to have.
One key difference is in the enforcement mechanisms for early approval of innovative therapies – accelerated approval in the US, and conditional approval in Europe. Pazdur deems these functionally equivalent: “it’s a matter of terminologies.”
“But there are differences here. Both of the programs have options to take the drug off the market if clinical benefit or subsequent trials are not done,” Pazdur pointed out. With its longer experience with accelerated approval (EMEA only adopted conditional approvals last year), there have been more tests in the US. And even when a drug has failed in its mandatory trial to confirm the benefit that was the basis of the accelerated approval (AstraZeneca’s lung cancer therapy Iressa), FDA opted not to outright rescind the marketing authorization, instead laying on marketing restrictions and limiting distribution. Still, “most of our drugs have not faced that issue of coming off the market,” Pazdur admitted.
The US legislation on accelerated approval stipulates that sponsors should approach confirmatory trials with “due diligence” – which, Pazdur added, “really is in the eyes of the beholder. Let’s face it, it does not have a legal definition. Whereas I noticed the Europeans were a bit more clever and probably learned from our experience. They put a one-year review, and we don’t have that.”
The EMEA’s Francesco Pignatti made clear that they don’t really have the explicit authority to rescind the approval for compliance reasons, though the one-year re-review remains untested. “It’s only in the case of adverse new information that one could see this change,” he predicted. But the opportunity to reconsider the emerging knowledge of a drug’s risk-benefit was clearly an aspect Pazdur admires.
The FDA official expressed some frustration with the way sponsors handle confirmatory trials for accelerated approval. “Several ODAC meetings have discussed the sometimes lack of due diligence on the part of sponsors in fulfilling these commitments,” Pazdur pointed out. “They are mandatory commitments and should be taken quite seriously by the sponsor.”
There too the EMEA built in a mechanism that FDA would find useful: the European regulators can impose financial penalties if the postmarketing studies are not delivered as agreed.
Consultation with external experts is one area where Pazdur seems to prefer the US system, though he handled the comparison with diplomacy. Unlike the FDA advisory committee system, the EMEA’s Scientific Advisory Group meetings are closed to the public. They’re even mostly closed to the companies involved (there are open portions of the meeting for the sponsor to make a presentation, but then the discussion is closed off again). Pazdur questioned whether the process would be improved or hindered by having public involvement.
Without any experience with that, Pignatti declined to speculate, although he did note the EMEA is “rather far” from having public access for those meetings. Pazdur, however, jumped in – having attended both SAG and CHMP meetings “and obviously the ODAC meetings.”
“To be honest there’s a remarkable similarity as far of the discussions,” he said. In fact, the consistency – reassuringly – holds up with the internal regulatory processes as well, he noted. “Although we’re independent agencies and usually have not discussed the applications prior to our teleconferences, many of the exact same issues come up. And although people love to point to the differences between decisions that the EMEA and the FDA make, by far there’s more similarities than any differences.”
Despite the “lack of transparency” Pazdur noted in the European system for external consultations, the FDAer openly admired the transparency that EMEA gives regarding negative regulatory decisions. The EMEA publishes its negative opinions and reviews on withdrawn applications as well as the positive opinions. “One of the issues that we have in the FDA, which is quite problematic for those of us that work in the FDA,” Pazdur noted, is that when the agency does not approve a drug, the review documents and even the complete response letter that lays out the deficiencies in that application are not released to the public. Companies could release that information (although trust us, they don’t), but FDA is tied from even commenting.
“So this I think is one of the main reasons that we have this apparent lack of transparency, because we cannot release negative information. When we approve a drug, all that information goes out on the web. But for non-approvals, it’s truly the black box warning, so to speak, in its ultimate form,” Pazdur said. --Mary Jo Laffler
Sunday, May 31, 2009
FDA and EMEA: Minding the Gap
Friday, May 29, 2009
DotW: The Jury Is Out
Is the biotech financing climate warming? As the WSJ pointed out yesterday, big deals such as Sanofi's licensing of Exelixis' PI3 Kinase Inhibitors (see below) and JNJ's acquisition of Cougar Biotech might suggest it's time for more optimism in our industry, as does the good news we report below for Cytokinetics.
Still, for a large portion of the sector--notably small cap biotechs whose products or clinical trial data are far from perfect--we suspect the struggles to find financing at a reasonable price continue.
Metabasis, a San Diego-based biotech focused on liver and metabolic disease, is a prime example. Unable to get additional funding , the biotech announced on May 27 that it would be reducing headcount by 85% to just 7 employees. Execs at Curagen likely know what remaining staffers at Metabasis are going through. In February the Connecticut company announced it was looking at strategic options; this week comes news of its sale to Celldex Therapeutics (see below).
And it's likely there will be more examples in the weeks to come. According to Simos Simeonidis, a senior biotechnology analyst with Rodman & Renshaw, "there are still a number of small-cap companies that will fall victim to the crisis and will either go out of business, merge or be taken over at low valuations.” (You can read more about Simeonidis' views of the industry in an upcoming Pink Sheet story, scheduled to appear Monday June 1.)
The jury is out on a number of other big issues as well, including CSL's planned take-over of Talecris. Do recent moves by the FTC signal a more judicious view of mergers under the Obama Administration? Shaking our magic eight ball, we say...the jury is still out, but the consequences could be huge--$3.1 billion big to be exact--for Talecris' PE-backers, Cerberus Partners and Ampersand Ventures.
And then there's the niggling question of rights to Remicade and Simponi. J&J finally made a move this week, asking for arbitration regarding ownership of the anti-TNF bluckbuster and its next-generation follow-on. In a press release, the diversifed pharma noted: "As its public statements have made clear, Merck is acquiring Schering-Plough. The acquisition constitutes a change of control that triggers the right of our Centocor Ortho Biotech subsidiary to terminate the agreements." Seems like the pharma wasn't fooled by all that reverse merger mumbo jumbo and Merck CEO Dick Clark may have to pay for his sandwich--and the loss of Remicade and Simponi--after all.
As you ponder these weighty issues and make your own rulings, take time to peruse...
DxS/Boehringer Ingelheim: There's been no official ruling in the industry about the business model for companion diagnostics, but that hasn't stopped DxS from inking deals. The company's latest pact: an agreement with Boehringer Ingelheim to develop a companion test for the pharma's BIBW 2992 (also known as Tovok), a novel tyrosine kinase inhibitor being tested in non-small cell lung cancer that acts by irreversibly blocking two promoters of tumor growth, the epidermal growth factor receptor (EGFR) and HER2 receptor. Because BIBW 2992 is more effective in patients carrying mutations in the EGFR gene, DxS will aim to develop a test to detect those genetic differences, allowing for the potential segmentation of lung cancer patients and a more personalized approach to therapy. Financial details of the deal were not disclosed. DxS is one of a number of companies to embrace the possiblity that there are real revenues to be had from companion tests, especially in oncology, where the drumbeat for individualized therapies grows ever louder. Last December, DxS signed a US-centered deal with Amgen to provide a companion diagnostic for the Big Biotech's colorectal therapeutic Vectibix. The test maker's so-called TheraScreen K-RAS test is already on the market in the EU and is used to help doctors determine which patients are unlikely to respond well to anti-EGFR therapies such as Bristol-Myers Squibb/ImClone's Erbitux (cetuximab) and Amgen's Vectibix. Moreover, DxS and Amgen have collaborated since last year on selling TheraScreen K-RAS alongside Vectibix in Europe, where the drug is cleared for patients with refractory metastatic colorectal cancer in which there is no K-RAS mutation.
Celldex Therapeutics/Curagen: The jury ruled this week on the case of Curagen and an independent future and decided overwhelmingly against said biotech. On Friday May 29, Celldex Therapeutics, which last year reverse-merged with Avant Therapeutics, announced it was acquiring the Connecticut-based biotech in a tax-free stock-for-stock transaction that values Curagen at approximately $94.5 million. The acquisition adds a portfolio of 11 oncology-focused antibodies to Celldex's immunotherapy medicines, including CR011, a fully human mAB-drug conjugate in Phase II trials to treat metastatic breast cancer and late stage melanoma. Perhaps evem more valuable is Curagen's on-hand cash: the $54.5 million Celldex stands to gain will go a long way to helping fund its pipeline, which includes CDX-110, a potentially break-out cancer vaccine for glioblastoma in Phase II trials and the subject of a partnership with Pfizer in 2008. The news announcement Friday brings to an end the questions about Curagen's specific future, the basic outlines of which had been mapped out in February, when the company disclosed it had hired an investment bank to explore "a broad range of strategic alternatives." The company's stock had been in freefall since a Phase II mucositis drug, velafermin, blew up in clinical trials. The failure of velafermin, and the subsequent decision to exit a partnership with Denmark's TopoTarget for the HDAC inhibitor belinostat, left Curagen a one-trick pony, dependent on the success of CR011. And CR011 is far from a slam dunk. Antibody-drug conjugates have had mixed success in the clinic, with only Wyeth's Mylotarg for acute myeloid leukemia garnering FDA approval.
Amgen/Cytokinetics: With so many option-alliances and option-acquisitions getting signed these days it’s nice to have a reminder that yes, options do in fact get exercised. On Tuesday Cytokinetics said that Amgen was picking up its option on the smaller biotech’s cardiac contractility program, triggering an option payment of $50 million. The program’s lead candidate, the heart failure drug CK-1827452, is a small molecule cardiac myosin activator in Phase II. Back in 2006, when Amgen originally inked its option deal with Cytokinetics, the biotech received a $75 million up-front payment. This latest deal means the small company is now eligible for pre-commercial milestone payments totaling $600 million. What’s more, Amgen now foots the bill for ‘452’s development, cooling the burn on Cytokinetics’ newly boosted $145 million cash balance. It’s all about the runway, people, and Cytokinetics can now see as far as 2012. For a full discussion of Cytokinetics development strategy for ‘452 and a look at how investors in a recent registered direct offering of Cytokinetics shares could make out like bandits, check out the coverage over at The Pink Sheet DAILY--Chris Morrison.
Sanofi-Aventis/Exelixis: One target area the Big Pharma Jury has ruled on: PI3 kinases. And the verdict? KA-CHING! At least that's the case for Exelixis, which cashed in May 28 in a big way in a deal with Sanofi-Aventis. In exchange for $140 million up-front, Sanofi gains world-wide rights to Exelixis's two earlyish-stage clinical compounds, XL147 and XL765 (both are in Phase Ib/II). In addition the two companies will collaborate on the discovery of new, isoform-selective PI3 kinase inhibitors for oncology indications. They will each contribute preclinical compounds for development work, but Sanofi shoulders the cost of the work to the tune of $21 million for the next three years. Importantly Exelixis will reap downstream benefits no matter which companies' molecules are chosen for clinical studies. This latest deal has the requisite biobucks--north of $ 1 billion plus double-digit royalties for XL147 and XL765--that we've come to associate with traditional pharma-biotech deals (it will be quite another matter if said money actually materializes). As Chris Morrison wrote yesterday, IN VIVO Blog is more impressed with the size of the upfront, which is on-par with the biggest clinical-stage deals so far this year: Novartis' global license to Portola's Phase II cardiovascular candidate elinogrel and BMS's deal for Zymogenetics interferon lambda. The out-sized deal price suggests that assets deemed "too good to pass up" still command high value, despite the economic climate. For Sanofi the Exelixis deal is just the latest sign that partnering is in the ascendance at the French pharma, a message repeated recently at BIO, and it allows the company to catch up in an important emerging target area where it lacked in-house programs.
(Image courtesy of flickr user wallyg through a creative commons license.)
Big Pharma ISO Big Democrat: Who Will Pfizer Land?
As we reported here, Pfizer is revamping its government affairs group to align better with the Obama Administration. Its first recruit is transition team member Greg Simon.
That’s a great hire, but the company wants to land a really big name Democrat to head its public policy and government affairs operation. And we mean big. After all, it’s a big job. Really big. Pfizer is already the world’s biggest pharmaceutical company, and it keeps getting bigger. And the policy stakes are big. Health care reform big. And, no matter how the reform debate turns out, the role of government in driving pharmaceutical markets will be bigger too.
There’s just one big problem: every leading Democratic political figure wants to be part of health care reform, so its not like there’s lots of big names available for Pfizer to hire.
Gee, if only they’d done this when the Republicans were in charge they could have had anyone they wanted….
Okay, that would have been suicidal. In fact, we have to give Pfizer credit. Their last “big name” policy hire, Tony Principi, was not only a former cabinet secretary in the Bush White House, he reached retirement age at the end of the Bush Administration. (He turned 65 in April). No need for a messy separation on Inauguration Day!
So far, we’ve heard only two candidates for the Pfizer job: Former House Majority Leader Dick Gephardt (picture below) and former White House Press Secretary Michael McCurry.
Those are two strong candidates. Gephardt ran for President twice, (even though he got fewer votes than Pfizer has employees), and he remains a nationally known figure. He certainly seems interested, having teamed up with the Pharmaceutical Research & Manufacturers of America to promote innovation in health care reform via the Council for American Medical Innovation-though we're not sure the made-in-the-USA theme is the best fit for Pfizer's emerging markets strategy.
McCurry never held elected office, but he has more than three decades of experience as a political operative and would bring great contacts with the Democratic establishment. Like Gephardt, he has engaged with PhRMA, offering advice on dealing with the industry’s chronically poor public image. (Read more here.)
So Pfizer would probably do well to land either of those two.
But, come on, there have to be more possibilities right? Here’s a few to get you thinking—and please give us your suggestions as well.
Tom Daschle would be an obvious choice, so obvious that we assume he must have said no already or he would be on the list of candidates we heard about.
Bill Clinton is the biggest name out there, and if his wife weren’t the Secretary of State, we’d be prepared to make the case that he is exactly the person for Pfizer to go after. But she is, so we won’t.
Jimmy Carter’s a non-starter. Too old. Plus he’d laugh in Pfizer’s face.
Al Gore? Interesting…he’s probably tired of looking at the Nobel Prize and Oscar Statuette display by now.
Actually, when it comes to Tennessee politicians, Harold Ford would be a great choice. The only hitch: everyone thinks he has a bright future ahead of him in politics, so why give that up now?
That’s it! Eliot Spitzer! He’s available, and he’s local.
Bio-Rad "GTCA," FTW
Hat tip to Bnet Pharma, where Trista Morrison provides a great overview of the battle of the lab equipment supplier viral videos. Happy Friday.
Email subscribers, click here if you can't see the video.
Thursday, May 28, 2009
The Next "Non-Interference" Clause
There’s plenty of substantive reasons for industry to support the approach outlined in Schrader’s bill. (You can read our coverage of the bill here; for more on why industry is so concerned about CER, start here.)
But what caught our attention was a short clause in the bill labeled “Physician Out.” The provision is an effort to put into legislative language a protection against industry’s nightmare scenario: a situation where a federal agency essentially dictates treatment based on one-size-fits-all conclusions about comparative (and cost) effectiveness.
So, the bill says:
“None of the reports submitted under this section or research findings disseminated by the [new federal comparative research] Institute shall be construed to prevent the physician and patient to ultimately determine what is best for the patient involved given the individual circumstances of different patients.’’Does anyone else hear an echo of the now infamous “non-interference” clause included in the Medicare prescription drug legislation enacted in 2003? That provision famously prohibits the federal government from interfering in the pricing of prescription drugs sold under the Part D benefit.
The protection was deemed critical by biopharma companies—especially on the biotech side of the ledger—as a way to assure investors that the new law was not a price-control bill.
But it also became an instant rallying cry for Democrats, who painted the Part D program as gift to Big Pharma at the expense of better prices for the elderly and disabled.
To us, the hue-and-cry over the clause was always much ado about nothing. The entire Medicare Part D model was premised on the notion that private drug insurance plans would take risk for delivering high quality care at the lowest possible cost. If you believe that model works, there is no reason for the government to interfere in the first place. On the other hand, if the Part D model didn’t work, price controls were inevitable.
More to the point, the Bush Administration had no intention of interfering, so the clause protected against a threat that didn't exist. In the end, the “non-interference clause” didn’t add a penny to the bottom lines of any biopharma companies. But it did undercut the political payoff industry might have gotten from Part D.
The pharmaceutical industry deserves credit for making the drug benefit happen at a time when there was no reason to believe it would. Yes, it was good for business, but it was also good for Medicare beneficiaries.
It would have been naïve to expect a grateful American public to shower Big Pharma with love—but thanks to “non-interference,” something closer to the opposite happened. So, whatever good the “non-interference” clause did to reassure investors, it was a gift to critics of the industry and especially to the Democratic party, allowing them to score political points without undercutting a long-held goal of expanding the generosity of the Medicare program. The fact that the Democrats have dropped the issue (for the time being at least) doesn’t change the reality that the outcry over the provision probably helped a few of them get elected in the first place.
Will history repeat itself with the effort to prevent “interference” in the doctor-patient relationship? On its face, the clause strikes us as another exercise in wistful thinking if not legislative over-reaching. If your belief is that CER is a conspiracy to create a government-dictated health care rationing system, why would these few words make a difference? More realistically, if government-funded CER defines professional standards and coverage policy, there is no need for anyone to interfere in prescribing decisions—they will conform regardless.
The bigger issue is that all this emphasis on protections seems to us to be painting industry in the wrong light—defined by fear rather than opportunity.
After all, everyone in industry believes that pharmaceutical therapy in general is a cost-effective form of health care. (Lilly CEO John Lechleiter made that argument earlier this month during a DC health care policy address.)
The fear that CER will be defined as driving down the small slice of spending on health care devoted to pharmaceuticals is understandable—but probably misplaced. After all, even if pharmaceutical spending is zeroed out, health care spending will still be on an unsustainable course in the decades ahead. Over time, any federal comparative research effort is much more likely to focus on variations in practice that drive huge costs, rather than focusing narrowly on whether drug A is better than drug B.
So, by rights, biopharma companies should be leading the charge on comparative effectiveness. Instead, the perception is that industry opposes CER. That is not the official position of any company, to our knowledge, but that is beside the point. Right now, it looks like industry is afraid of CER—as if it doesn’t believe what it says about drugs being cost-effective.
And that’s the danger of falling into the “non-interference” trap. If biopharma companies truly believe in the value of their therapies, they shouldn’t let themselves be defined as afraid of the consequences of research to prove it.
Conspicuous Consumption: FDA Makes TB a Priority
Margaret Hamburg has only been on the job as commissioner of the Food & Drug Administration for two days, so it is obviously too early to pronounce on winners and losers in the Hamburg era. Except in one case: it already looks like the Hamburg years will be good ones for companies pursuing new therapies or vaccines for treatment of tuberculosis.After all, Hamburg’s role two decades ago in combating drug resistant TB as New York public health commissioner was one of the defining elements of her resume when she emerged as the nominee for FDA commissioner. As she told the Senate HELP Committee during her confirmation hearing earlier this month, New York’s “rapid response to an epidemic of drug-resistant tuberculosis became the model worldwide.”
But it’s not just Hamburg talking about TB.
FDA’s new chief scientist—Jesse Goodman—highlighted a TB vaccine as an example for the need to focus on global public health priorities during a keynote address at the Food & Drug Law Institute annual meeting in April.
“There are billions around the world who clearly need an effective TB vaccine,” he said, citing an analysis by BIO Ventures for Global Health indicating that the market for such a vaccine would exceed $1 billion—even without sales in the US or other developed economies.
That’s not all: “If we had a highly safe and highly effective TB vaccine it would probably make sense to use it in this country,” Goodman added, noting “the chaos” that followed one traveler returning to the US with extremely drug resistant TB. That’s music to the ears of companies like Sanofi and GSK, which are developing TB vaccines. (You can read more of Goodman’s remarks to FDLI in The RPM Report.)
Then there is an upcoming meeting of FDA’s Anti-Infectives Drugs Advisory Committee June 3 to discuss “issues related to the development of drugs for the treatment of tuberculosis, including drug resistant tuberculosis.”
“Areas of discussion include diagnosis, treatment duration, study design (such as endpoints and duration of follow up) and safety issues,” the meeting announcement says. (We’ll have coverage of the meeting itself in The Pink Sheet next week.)
The meeting was announced by FDA March 12, one week after we broke the story of Hamburg securing the White House nod for FDA. We missed the coincidence at the time, but in hindsight it’s a clear indication of one priority for the new FDA leadership. (Yes, the TB meeting was being planned before Hamburg was picked—but then again, Hamburg was on the HHS transition team…)
A search of our Inteleos database shows at least 34 drugs and vaccines in development for TB. The Hamburg years should be good for those projects.
Exelixis/Sanofi: The Price of Playing in PI3K
During Exelixis' year-end pipeline update in December 2008, following the biotech's lucrative XL184 et al. deal with BMS, Exelixis R&D chief Michael Morrissey said that the company's two PI3 kinase programs, XL147 and XL765, would likely be out-licensed in the near term.
"We want to partner these compounds outright," Morrissey said. "Qualitatively, the interest in the PI3 pathway is today where MET was four or five years ago," he said. "Every major drug maker is trying to work in this space, [but] we're clearly in the lead." See this Pink Sheet DAILY piece about the pipeline review for more.
Today Exelixis cashed in, inking a deal with Sanofi-Aventis for worldwide development and commercialization rights to the two early-stage clinical compounds (both are in Phase Ib/II). In addition the two companies will collaborate on discovery of new, isoform-selective PI3k inhibitors for oncology indications, sharing R&D responsibility through preclinical development, after which Sanofi takes the lead. The companies' press release is here.
Exelixis' development lead in the space translated into a pretty impressive price tag. The biotech gets $140 million up-front plus guaranteed research funding totaling $21 million over three years. The biobucks milestone total exceeds a stratospheric $1 billion, which includes some notoriously difficult commercial hurdles, plus royalties. Still, even just the guaranteed money is massive. Practically mini-bar pricey. In fact (figuring each compound was valued equally) by up-front payment it's on par with the biggest clinical-stage deals so far this year: Novartis' global license to Portola's Phase II cardiovascular candidate elinogrel, signed in February, which included a $75 million up-front payment, and BMS's deal for Zymogenetics interferon lambda, a Phase I biologic that fetched $85 million up-front in January.
Why the flashy price tag? PI3 kinases are important in cell signaling pathways that influence a range of fundamental cellular activities including growth, migration, proliferation and survival. Various PI3k isoforms have been implicated in a variety of cancers as well as cardiovascular, neurodegenerative and immune-inflammatory diseases.
And the space has been hot for some time. Last April, Roche bought PI3k-focused PIramed for $160 million and a potential $15 million earn-out (a solid return for JPMorgan and Merlin, the biotech's two backers who had invested only ₤10 million). Last September GSK essentially made Cellzome its center for kinase drug discovery in a $25 million up-front deal that includes an option on some undisclosed programs (a dual-targeted PI3k-delta/gamma program may be included, though not Cellzome's lead PI3k-gamma inhibitor). And investors in Calistoga Pharma's May 2009 $30 million Series B--Alta, Amgen, Frazier and Three Arch--are certainly betting on PI3k's potential in both oncology and inflammatory diseases like asthma and RA.
As Exelixis' Morrissey noted back in December, the space is crowded with pharma players as well: Novartis, Wyeth and AstraZeneca have ongoing home-grown programs (Novartis and Wyeth in oncology, AZ in thrombosis), for example. BMS accessed some PI3k assets via its acquisition of Adnexus. And in addition to Cellzome and Calistoga a bunch of small biotechs have PI3k projects in the works, including Avila Therapeutics and Semafore Pharma.
For Sanofi the Exelixis deal is just the latest sign that partnering is in the ascendance at the French pharma, a message repeated recently at BIO, and it allows the company to catch up in an important emerging target area where it lacked in-house programs. The move is the Big Pharma's third significant oncology deal in just over a month, building on the purchase of oral fludarabine from Antisoma earlier in May ($65 million) and the structured acquisition in April of BiPar Sciences (up to $500 million).
Exelixis can now boast a cash runway that should last it at least four years (about $238 million as of the end of March, bolstered slightly by an R&D deal with Boehringer Ingelheim signed a few weeks ago). With that cushion (augmented by a line of credit from Deerfield), and having fulfilled yet another dealmaking promise, the company is the modern model of a successful R&D-focused biotech.
UPDATE: this morning's conference call shed a little more light on the companies' discovery collaboration. Each company will contribute multiple preclinical compounds targeting the alpha and beta isosomes of PI3k to a pool of assets. No matter who originated any of the assets chosen to go forward, the companies will share in the the rewards (though Sanofi will foot the development and commercialization bill).
Also: Exelixis' royalty on '147 and '765 will be in the "healthy double digits," according to CEO George Scangos. Royalties on compounds out of the discovery collaboration will vary depending on multiple factors.
Exelixis wouldn't give a firm estimate on their cash runway--above we suggested four years, on the call they were hesitant to go beyond their December commentary, though Scangos noted because of reimbursement from Sanofi "the fraction of our spend covered by partnership revenue goes up. The pressure on our bank account goes down" because of this, but R&D expenses may not plummet because "We're still going to show that spend."
On the general interest in PI3k, Morrissey noted that "the vast majority of pharma companes are very interested in PI3k inhibition," suggesting it would be easier to list the ones that do not have interest than to list the ones that do. Which could eventually mean another PI3k deal for Exelixis, outside of oncology. Non-oncology directed PI3k inhibitor programs in its pipeline remain Exelixis' sole property, outside the scope of the Sanofi deal.
image @ exelixis.com
Tuesday, May 26, 2009
GSK and Pfizer's HIV Joint Venture: Why It’s a Path Forward
Real innovation in dealmaking, like pharma R&D, is a rare commodity. As with R&D, dealmaking innovation often gets blocked by entrenched interests or misunderstanding or simple inertia. There are lots of reasons not to repeat the single most innovative and successful transaction of all time – Genentech/Roche – but none of them outweigh the spectacular opportunity that deal created.
We’re not going to say that the GlaxoSmithKline/Pfizer joint venture in HIV is, itself, comparable to Genentech/Roche. (See some short reports with some additional transaction details on the JV here and here and a more in-depth analysis here). But it could solve a set of knotty problems that by and large companies have, for whatever reason, failed to address.
First, earnings-pressured pharmas need help financing their pipelines. One option seems to be disappearing – getting investors to directly fund development (like the Lilly/TPG/Novaquest arrangement on a group of Alzheimer’s projects). Besides the market meltdown, which has taken cash away from speculative, illiquid investments, the parties’ goals were, in the dealmaker’s parlance, unaligned. Investors want to cherry pick the pieces of the pipeline they’d most like to fund, Pfizer EVP and chief strategy officer Bill Ringo told us the other day, almost as if they wanted to guarantee themselves a return (which, in the good old days, was something they could pretty much get just by investing in Pharma). The more risk they run, of course, the more upside they want (ideally, to be able to sell successes to the highest bidder) – which naturally limits the upside, and strategic value of the asset, for the pharma partner.
Here’s another problem. Most Big Pharmas want to be big and diverse enough to balance out the risks of development – but also want to be small enough to encourage biotech-ish entrepreneurialism. Various companies are trying to have their cake and eat it too by splitting into divisional enterprises (specialty pharma, or primary care, or oncology) with their own CEOs and CSOs and P&Ls. But we remain firmly Missourian about the whole idea. Will the commercial groups be able to buy research wherever they want – or remain saddled with what’s provided internally? Will research be able to sell its best fruits to the highest bidder in order to maximize their value? And for all their divisionality, how much of the corporate infrastructure – IT, manufacturing, finance – will these divisions have to absorb?
The GSK/Pfizer HIV joint venture is an interesting solution to both problems – the big/small paradox and the funding troubles. The new company is relatively small (first year projected sales: $2.4 billion); it’s got its own managers; it makes its own R&D decisions. The research stays within the parent companies and the JV pays its expenses – but if the pipeline projects don’t work out, and the JV doesn’t like what GSK and Pfizer are producing, the JV can buy their research from wherever they want. “It puts pressure and accountability onto the scientists,” GSK’s chief strategy officer David Redfern told us, echoing a favorite theme of GSK’s R&D boss, Moncef Slaoui.
Meanwhile, Pfizer doesn’t have to pay for a new worldwide commercial HIV organization on the basis of its underperforming HIV assets (maybe underperforming because it doesn’t have the commercial group it needs); GSK gets the near-term HIV pipeline it had otherwise failed to deliver. Far as we can see, no cash changes hands.
The biggest negotiating obstacle, apparently, was the equity split (right now, 85% GSK, 15% Pfizer) – but according to Redfern, once they’d abandoned the attempt to price the pipelines, and instead started to adjust ownership based on cash flows, “the heat went out of the valuation debate.”
And then there’s the optionality of the thing – one of its main advantages, believes Redfern. The JV could fund its business development with its own equity rather than dipping into cash. When the financial markets get friendlier, the whole thing could be spun off. And presuming success even close to what Gilead has achieved, the JV owners would get big stakes in a growth company that would theoretically trade at a significantly higher PE.
And that same equity would reward the JV’s employees in a way Pfizer and GSK stock simply can’t. Not to mention the fact that it’s a lot easier for an employee to see his personal contribution to growing a company 1/29th the size of Pfizer.
And one other aspect of optionality, notes Bill Ringo: if this works, “it provides us a model we can duplicate elsewhere.” He hasn’t apparently talked to GSK yet about repeating the idea in another therapeutic area, “but if there were another opportunity to do the same thing again with GSK, we’d do it.”
We recognize that plenty can go wrong with this deal. GSK’s firmly in the driver’s seat, with seven members of the nine-person board. And Pfizer could get tired of that. We also sense that Pfizer and GSK are not on the same page when it comes to R&D accountability (we think GSK is going to be tougher on its researchers than Pfizer will –rewarding more and firing more).
But whether it works or not, the drug industry should be paying close attention to this deal. Even more attention than to the big mergers. All of those are one-time events; it’s hard to see that they’ll be in any significant way transformational. Mostly, they’re stop-gap measures. (OK, we did argue the opposite way around about Pfizer/Wyeth – though most of the reader response was pretty skeptical).
But the GSK/Pfizer JV is repeatable. And scalable. It moves the industry in the direction it needs to go: smaller, customer-focused, financeable. And it gets our vote for the most innovative deal we’ve seen so far this year.
Image from flickr user joefutrelle used under a creative commons license.
While You Were Long Weekending
We hope you enjoyed the long Memorial Day / Bank Holiday weekend, and that the sun shone whether you attended a parade or laid a wreath or barbecued or landed the space shuttle Atlantis or took two of three from the Yankees or won the Monaco Grand Prix.
So, while you were ...
- ... exercising: Amgen has exercised its option to Cytokinetics' cardiac contractility program. Cytokinetics got $75 million up-front in a combined stock sale and technology license fee in the January 2007 deal that gave Amgen the option on the then-Phase I heart failure drug CK1827452. So far today Cytokinetics has announced a 9am conference call, and Andy Pollack at the NYT is reporting the alliance is a go. The deal's original terms called for Cytokinetics to foot the R&D bill, so the $50 million from Amgen triggered by today's news will come in handy; oh, and the usual biobucks milestones and royalties.
- ... resigning: out with the old at Daiichi's Ranbaxy unit as CEO Malvinder Singh was ousted and COO Abtul Sobti promoted to the top spot.
- ... euphemizing: Awwww, it's business time. Sciele has licensed worldwide rights (word doc) to Plethora's Phase III candidate for premature ejaculation, PSD502. Plethora gets $8.4mm up-front for the additional territories (Sciele had licensed US rights in 2007).
- ... making up new words: Chugai has expanded its commercial license to Gene Bridges' 'recombineering' technology, Red/ET.
- ... twittering (during brain surgery): yep, the NYT explores how hospitals are on the (excuse us) cutting edge by web-casting and twittering and generally being hip to new media while simultaneously removing gall bladders and kidneys and tumors of all sorts from patients.
- ... settling: Biovail's proxy contest with Eugene Melnyk? It's over. Biogen's fight with Icahn? Not over, yet.
- ... blocking: CSL says the US Federal Trade Commission may block its $3.1 billion takeover of PE-backed Talecris Biotherapeutics. Reuters has the story.
- ... approving: FDA has approved tadalafil for PAH. United Therapeutics licensed rights to market the drug in PAH from Lilly late last year.
Friday, May 22, 2009
DotW: Damned If You Do, Damned If You Don't
Alliances are a necessary evil.
Despite all the verbiage around the softer virtues of collaboration, the fact is that most companies would just prefer to be left alone. Doing the tango, as the Argentian exhibitors at BIO demonstrated, takes too much work. And frankly costs too much.
Thus this week: Onyx is now suing its partner Bayer for double-crossing it on a next-generation Nexavar (see Ed Silverman's Pink Sheet Daily analysis). Naturally, Bayer would love to find a compound of its own that’s as good as Nexavar and which doesn’t cost it a profit-share. For its part, Onyx says the follow-own is a close chemical brother to Nexavar, discovered as part of the collaboration (well – legally, that is: anything discovered in the field by either company before January 31, 2000 counts as part of the collaboration).
Think about the big acquisitions – most of them are transformations of alliances that looked more expensive than they were worth. Pfizer’s acquisitions of Warner-Lambert and Pharmacia were most fundamentally about the larger company getting 100% of the jointly promoted products (respectively: Lipitor and the Cox-2 franchise, including the star player Celebrex). By our reckoning, Roche’s acquisition of Genentech was fundamentally a response to that extraordinarily successful alliance’s costs – in duplicate infrastructure, royalties, joint decision-making.
And to our minds, the most interesting alliances of the last few months aren’t really alliances but tactics to pool resources without having to actually do all that much ongoing collaboration. The GlaxoSmithKline/Pfizer joint venture in HIV creates an independent company which starts out buying its research from its parents – but can go its own way later. Meanwhile, the Purdue/Mundipharma/Infinity deal seems to be as much an anti-collaboration as an alliance: the funders (Mundipharma and Purdue) basically don’t interfere in any way with Infinity’s research or development or, for that matter, the registration process.
Even most of the option deals we’ve seen recently (and which will be the subject of an in-depth analysis from Ellen Licking in the coming issue of Start-Up) are anti-alliance alliances – the small company does a bunch of work independently; the big company then decides whether there’s enough evidence to buy the thing. Novartis just made that logic explicit – see below in our write-up of its re-arrangement with Elixir.
Novartis announced another variation of the non-alliance alliance this week in its re-structuring of its respiratory collaboration with Schering-Plough. Which is probably a good deal to start with in this week’s edition of ...
Novartis/Schering-Plough: Why share two pies, when you can have one each? Especially when each gets to eat the one it prefers. Novartis and Schering-Plough this week undid two previous co-development and co-commercialization deals around two respiratory combination drugs, each agreeing to instead take full rights to one.
In what’s essentially an un-deal, Novartis gets exclusive worldwide rights to develop and market QMF 149, a fixed-combination of its own indacaterol (a long-acting beta-2 adrenergic agonist) with Schering-Plough’s inhaled corticosteroid mometasone (un-doing this 2006 deal). Schering-Plough, meanwhile, gets similarly full rights to a combination of mometasone with Novartis’ formoterol, another long-acting beta-2 adrenergic agonist (un-doing this 2003 deal).
It’s certainly neat—no money changed hands according to Novartis’ CEO and Chairman Dan Vasella, who added that “we wanted to complete that disentanglement.” Indeed, history has shown that co-developments, co-promotes, co-anything is generally more complicated and likely to end in tears than a pure-play effort—particularly perhaps in this case with newly-enlarged Schering-Plough (though the parties had been discussing this divorce well before the Merck merger was announced, according to Vasella).
Behind what looks like a tidy sharing of the booty, we’re sure there’s some small print (or an awfully complicated equation around the sales-based royalty-sharing arrangement on the compounds). But by and large, it appears that Schering-Plough was happy to accept a later-stage compound (Phase III completed) with less risk and cost to come, in exchange for granting Novartis a combo that’s still in Phase II, but which uses Schering-Plough’s Twisthaler device.
Novartis is taking on more cost, then, but reckons it’s worth it to build up its own respiratory franchise around indacaterol (currently under review as a standalone, and a component of other development combos including one with a compound from UK biotech Vectura)—and to avoid the tangles of co-development and co-commercialization. – Melanie Senior
Shionogi-Sciele/Victory Pharma: And you thought the Chinese were financing the US economy. The Japanese have spent more than $18 billion buying US and European biopharmaceutical companies since 2007. And if you figure CV Therapeutics wouldn’t be part of Gilead had not Astellas launched its hostile bid, well, add another $1.4 billion to the total. Now some more deals – Takeda’s acquisition of IDM (see below) and Sciele’s $150 million acquisition of Victory Pharma, bankrolled by Sciele’s still brand-new owner, Shionogi. Essex Woodlands and Ampersand had committed $45 million to the company back in March – which means that, at least for Essex (Ampersand had been in the company longer, through an acquisition), its IRR on the deal has got to be pretty impressive (and its limiteds pretty happy with the new fund). Indeed, Essex is one of those venture funds sitting pretty right now -- $900 million in a new fund, mostly raised pre-crash, and half a dozen exits over the past year or so (most recently from Dow Pharma for Valeant’s $285 million plus earnouts and – ok, sort of an exit – its $100 million option-to-sell Ception to Cephalon). Essex has been focused on growth companies (revenue generating and close to, or at, profitability, like Victory). But with all that cash, a plethora of cheap deals, and most of the early-stage venture guys sitting on their hands, Essex is probably going to move further upstream and start bankrolling some of those discovery guys.
GSK/Oxford BioTherapeutics: Bankrolling discovery is exactly what GSK has been doing with its seemingly neverending string of option-alliance deals. But this one announced early in the week by Oxford BioTherapeutics has a bit of a twist: GSK will be doing some of the early stage work itself, generating antibodies to oncology targets provided by OBT. GSK will also get an exclusive option to license a monoclonal antibody that OBT will develop through to clinical proof-of-concept. OBT got an undisclosed up-front payment and will receive clinical, regulatory and commercial milestones plus a double-digit royalty on any sales for products OBT took to POC, and single-digit royalties on GSK mabs against OBT targets. If GSK opts out of any programs, OBT has the option to pick them up. OBT's target expertise comes from its Oxford Genome Anatomy Project database, which it calls the world's largest cancer protein database. OBT has one other antibody discovery deal, with Amgen, signed back in 2007 when OBT was still Oxford Genome Sciences.
Takeda/IDM Pharma: It's roughly a week until ASCO and--here's a surprise--cancer immunotherapy is back in the news. But even though Dendreon's positive Provenge results prove naysayers wrong (for now--the drug still isn't approved) Big Pharma is still in "show me the data'' mode when it comes to this novel form of therapy. The upshot? Companies can find partners--or even buyers--but those deals aren't likely to happen until there's been a major de-risking of the compound. That was the case this week for IDM Pharma.
For IDM Pharma, the news couldn't have come at a better time. About a week ago, the struggling biotech disclosed first-quarter earnings, noting cash and cash equivalents of $7.4 million as of March 31, down from $12.8 million at the end of last year. To survive, IDM shut down all development programs except Mepact and slashed staff headcount from 80 to 15.
Cancer vaccine makers probably shouldn't expect partners to come courting just because the field's seen one small-ish deal. While Takeda's interest in Mepact was great, IDM's other products, which include a dendritic cell-based melanoma vaccine called Uvidem, were less appealing because of their risky profile, according to the deal's orchestrator, Anna Protopapas, SVP corporate development at Takeda's Millennium Pharmaceuticals unit.
Interestingly, this is the first deal Protopapas and her team have announced since Takeda purchased Millennium for nearly $9 billion one year ago. Thus far, the aim to run Millennium as a stand-alone biotech seems to be working. We aren't exactly sure if Millennium is the Takeda oncology company or simply a Takeda oncology company, however. A closer look at the Mepact arrangement has Takeda Cambridge, the drug firm's European outpost, handling the immunotherapy's commercialization, not Millennium--which also happens to be in Cambridge--Ellen Licking.
Novartis/Elixir Pharmaceuticals: Another week, another option based deal. On Tuesday, Elixir announced that it had granted Novartis the option to acquire the biotech in a deal worth more than $500 million. The acquisition is dependent on Elixir's ability to move it's preclinical oral diabetes drug--a ghrelin antagonist--through successful Phase IIa trials. The announcement was actually just one of two made by Elixir: in addition to Novartis staking a claim on the company, the Novartis/MPM side-fund, which was created in 2007 as an attempt to more closely align Novartis' corporate venture and business development efforts, participated in the biotech's $12 million Series D.
The equity financing, plus the non-dilutive funding from the option (believed to be nominal--we couldn't identify the actual amount Novartis paid on top of the financing to acquire the company though we tried), put Elixir in a far more secure cash position. According to Elixir's CEO, Paul "Kip" Martha, the company was one of many in the industry operating with less than six months worth of cash. "This is a dramatic turn-around for us," he said in an interview with IN VIVO Blog.
This is the third option-style deal Novartis has done since the start of 2009 and its structure recalls almost exactly the March deal brokered for the rights to acquire Proteon, which is developing a recombinant human elastase designed to improve the outcome of arteriovenous fistula procedures in patients with end-stage renal disease. It used to be hammering out the terms for these kinds of arrangements was tough--traditional VCs and biotech CEOs worried that the option might cap a company's upside. That's less of a concern these days when cash is a biotech’s most important resource; thus, CEOs have accepted the hard reality that non-dilutive funding now and the greater certainty of a deep-pocketed partner or buyer in the future outweigh the potential reduction in overall deal economics necessitated by option arrangements.Finally this tie-up highlights a potential advantage of the option structure--keeping a Big Pharma engaged and potentially deepening the relationship. In 2007, Novartis's option was much more limited--it was strictly a licensing deal. This latest announcement suggests Novartis is impressed enough with Elixir’s pipeline that it sees value in owning the company outright--Ellen Licking.
Johnson & Johnson/Cougar Biotechnology: Finally, we should note that this has been -- on the investment front -- a relatively good week for biotech. We haven't seen this many acquisitions for a while. And thus, last night, J&J provided us with a pleasant send-off for the Memorial Day Weekend: its $870 million acquisition of Cougar (for more in-depth comments, see this post from earlier today).Image from Flickr user Mike "Dakinewavamon" Kline used under a creative commons license.
Notes from BIO: Getting Comfortable with REMS
A REMS, for those who may not recall, is the newly upgraded program to ensure a company has a strategy in place to manage and communicate a potentially serious risk with its medicine. And the implications are being gauged closely by industry, which is assessing whether REMS will wind up conferring a greater probability of approval or result in commercial dead-ends.
Drug makers, for instance, would like more guidance, according to Jeff Francer, assistant general counsel at PhRMA, who said REMS is the key issue to watch as a result of the FDAAA. “I would say it’s the effects of REMS on the approval process and post-marketing…We should continue to study how REMS and the implementation are affecting patient care. We, in industry, would like more formal guidance…For most of industry, it’s about REMS.”
A few feet away sat Jarilyn Dupont, director of regulatory policy in the Food and Drug Administration’s Office of the Commissioner, who said that “there’s always going to be tension” over the push and pull between industry and regulators over the requirements and implications. But she noted that the REMS program, which gives FDA some enforcement powers, is still new and that guidance will be forthcoming. “It’s really only out since September, so over time, you will see more guidance. But guidance development doesn’t happen over night.”
Another industry rep, Andrew Emmett, director of science and regulatory affairs for BIO, tried a more optimistic line by saying that, as “comfort levels are built and guidance” emerges, the REMS process should become smoother. Still, his comments about forthcoming REMS evaluations suggested an air of anxiety. The FDAAA requires that all REMS must include a timetable for assessments at 18 months, 3 years and 7 years after approval of a REMS. “There are a lot of questions in industry,” he said, “about what those are going to look like.”
Notes from BIO: Toast of the Coast--Incubator vs. Pfincubator
While an earlier session on raising capital in trying times was cancelled--as if to say "yes, it really is that bad!"--it was standing room only at yesterday morning's last-day session titled “Early Stage Investment Strategies: If Not Us, Who? If Not Now, When?"
Richter good-naturedly claimed that Benedyk’s incubator companies are indentured while she shops for the best deals for her companies. Benedyk says his companies are grown in a hot house with no worries, while others have to make a go in wild fields.
The problem?"Our companies have been very successful at growing very quickly, but then they tend to leave the area," Richter said. "From an incubation perspective, very successful," but from the point of view of the incubator's investor, San Jose, not as successful.
So where are they going? San Jose's biotechs are forced to establish facilities further up the peninsula in the Bay Area – taking jobs and business with them - because the incubator has the only lab space in the San Jose area. --Shirley Haley
image from flickr user caveman 92223 used under a creative commons license
Notes from BIO: Merck's Take on Biomarker-Based Drug Development
Merck sees itself as a leader in biomarker-based drug development. "We are toward the extreme end" of peer companies in the field, Executive Director of Licensing & External Research Reid Leonard said during a BIO breakout session May 19."We actually have very aggressive internal goals for the requirements for a biomarker strategy that is coincidentally built up with the drug discovery strategy for any new target."
But before you put Merck down as an advocate of personalized medicine, listen to how he described the company's approach:
"Ultimately our goal, despite the overall objective of being able to stratify patients where its appropriate and necessary, given the choice, if we are going to find a therapy that will treat a disease that many people will have, our preference is to find a way of doing that that in fact doesn't require stratification, that in fact picks a target that is intrinsically less sensitive to genetic variation than another target. So its using all the same data to try to essentially come up with a drug that in fact the physician can have some confidence will work in 80% of the people."
Notes from BIO: Biotech's Voice in Health Care Reform
"PhRMA doesn't speak for BIO."That message, says Bryan Cave LLC Partner Broderick Johnson, must be made very clear during the health care reform debate.
As we've noted, the Biotechnology Industry Organization has not been included in White House events on health care reform, while its Big Pharma brethren in the Pharmaceutical Research & Manufacturers of America have been.
Johnson doesn't necessarily think that's a bad thing. "A lot of these White House events get a lot of attention and that’s very important," he said during a May 19 BIO session. "But I think its just as important, if not more important, that BIO has a seat at the table at the roundtables being held by the Senate Finance Committee. That’s where a lot of the important decisions will be made...so don’t overlook the importance of being at that table."
Indeed, BIO's leadership is reassuring its members that not being at the White House is a good thing, since BIO has committed to nothing in health care reform, while PhRMA has found itself promising to play a role in delivering significant cost savings in the years ahead.
Of course, there's another way of looking at it: maybe the White House thinks it doesn't need BIO involved, or--indeed--that in dealing with PhRMA it is addressing BIO's interests as well.
It was that latter point that Johnson sought to address. BIO should be wary of "perhaps a misconception that...bringing PhRMA into the room will get BIO’s concerns addressed as well. Its really important to make the distinction clear that PhRMA doesn’t speak for BIO."
A strong point. Of course it might have been stronger if the panel discussion had included Biogen Idec CEO Jim Mullen. He was a late cancellation, replaced by Allergan CEO David Pyott.
Yep. Can't let those PhRMA guys speak for BIO.
Notes from BIO: A "Fire Drill" on Flu
When it comes to the "swine flu" outbreak (forgive the non-PC term), its hard not to look on the dark side. Either we are facing a catastrophic outbreak we are unprepared to prevent, or we have succumbed to yet another media-stoked panic that makes us all feel silly.Clearly the zeitgeist has tilted heavily towards the latter view, and surely we can all agree that is the better of those two choices.
Still, we were pleased when Vertex' outgoing CEO Josh Boger offered a third way of thinking about the current outbreak during a BIO "Super Session" May 20: this is a "fire drill"--testing our pandemic preparedness rather than our evacuation procedures--and like any fire drill it is only effective if everyone takes it seriously. So, if, as we all hope, this flu outbreak proves mild and manageable, we can still feel good about taking it so seriously.
Only time will tell if this outbreak is or is not the hamageddon it sounded like a month ago, but we at least were heartened that others on the panel (including FDA's point person on the flu, Jesse Goodman) adopted the "fire drill" metaphor as well. We feel better already.
JNJ Likes it Some Cougar. Rwwwaaarrrr!
Last night (alas, not at "midnight" like the Cougar in the above ad--email subscribers if you can't see the ad [you want to, it's a classic] click here.) Johnson & Johnson bought Cougar Biotechnology for $43/share in cash, or approximately a cool one billion dollars. To which we say: rrrwwwaaaar!, and, Ka-Ching!
OK a few caveats on the terms: minus Cougar's existing cash reserves the deal's valuation drops to about $870 million. And that price was only a 16% premium to the shares' previous close--by no means near the top of the list in takeout premiums.
But still the acquisition demonstrates the value of late-stage oncology assets (see Cougar's pipeline here), and Cougar hasn't exactly been kicking around forever--it was founded only six years ago. And despite the relatively small premium Cougar's institutional investors will have made out very well here.
The company, since going public via reverse merger with public acquisition shell SRKP4 in April 2006 (THIS is what VCs dream about when spending all those weeks and months trying to pull together a reverse merger) has raised a couple hundred million in private placements at per-share prices ranging from less than $2 (in 2006 in conjunction with its reverse merger) up to $29 (in 2008).
While early investors in Cougar like RA Capital, T. Rowe Price, Tavistock and others are counting their money, the deal will also throw a spotlight on a few other compounds. Medivation's MDV3100 is in the same class as Cougar's lead Phase III program abiraterone; both target androgen signalling. Algeta's prostate-cancer bone metastases candidate and "next-generation alpha radiopharmaceutical" Alpharadin, which we recently discussed here, is also in Phase III. A review of other companies in the space, including some earlier-stage companies, appeared in our March 2009 START-UP.
The deal may also be a 'win' of sorts for UK biotech BTG, which originally held rights to the abiraterone compound after funding the UK's Institute of Cancer Research's program in that area, and licensed it to Cougar in 2004 (not as big a win had BTG developed the candidate itself, of course). Looking at the disclosed terms of that deal it doesn't seem that BTG will get a payout as part of the JNJ acquisition, unless a 'milestone' was tied to a Cougar takeout.
Notes from BIO: A Big Gap In Industry's Plan For Comparative Research
The biopharma industry has a big problem with the comparative effectiveness research provisions included in the stimulus bill enacted earlier this year.As we noted in The RPM Report, it lacks several key elements that industry says need to be part of a functioning system, including an implementation process that they feel invovles their input. That sure makes a lot of folks at BIO very nervous.
Hence, an all-out lobbying campaign for new legislation to establish an independent institute to oversee comparative research.
The preferred approach was articulated by Senate Finance Committee Chairman Max Baucus in legislation introduced last year, and industry hopes to see that vision included in any health care reform bill this year, Foley Hoag Attorney Barrett Thornhill said during a breakout session May 20.
There's just one problem: even in the best case scenario, legislation won't change how the initial bolus of funding--$1.1 billion--gets spent.
Thornhill, whose firm represents the Partnership to Improve Patient Care--an association funded by BIO and PhRMA and other organizations to lobby on CER--puts the chances of getting the Baucus proposal into health care reform at just 50/50. But even it if is included and signed into law this fall, he notes, a new institute won't be set up until the end of 2010 at the earliest, with research projects beginning no earlier than 2011.
So "you have this gap between when the [stimulus] funding gets handed out until you have new framework even established," Thornhill noted. "So its hard for us to go out and lobby to have this Conrad-Baucus entity just control the funding. The pushback is 'What are we are going to do for two and a half years? Just sit on our hands?'"
"That's not what the House Democrats are interested in doing," Thornhill says, "and I guarantee that's not what they are going to do."
Thursday, May 21, 2009
Notes from BIO: Positive Message from Anti-Infective Development
Capital is hard to come by for anyone, but the ability of an anti-infective development firm to raise capital from at least six private funding sources sends as strong signal that the uncertainty in anti-infective development stemming from regulatory delays experienced by projects like telavancin and ceftobiprole may be fading into the background.
Prabhavathi Fernades, the CEO of Cempra, told a BIO breakout session today that FDA's recent work on anti-infective development guidelines is starting to send a clearer message. The objectives and targets for anti-infectives are going to be tougher, she thinks, and skewed towards more serious disease, but that is adding a sense of clarity to development projects. The clarity is what is important.
Fernandes, who has extensive experience in antibiotic development at Bristol-Myers Squibb and Abbott (where she took a lead role in the regulatory development of Biaxin) prior to starting Cempra, also said that developers have learned some harsh lessons on accountability and keeping close control on clinical trials based on the non-approvable and complete response letters from FDA during the past 18 months.
Cempra's CEO thinks that sponsors were getting a little lax and failed to follow up on issues such as big geographical differences in efficacy in clinical trials. From that perspective, the reaction from FDA is not a full-stop to anti-infective development, just a reminder to sponsors to pay closer attention to the details of their applications.
To Fernandes and her backers, it looks like the period of regulatory uncertainty at FDA may be coming to a close. Cempra has a macrolide-ketolide compound, CEM-101 (oral and IV) headed into Phase II trials this year. With bacterial resistance and pandemic influenza alternating for headlines, it might just be a good time to be developing a new generation of anti-infectives -- especially with clearer guidance from FDA and a new public health-oriented team leading the agency.
Notes from BIO: NCI's Bridge Over FDA Troubles
"We're from the government and we're here to help you."
Here's a twist on that cliche: 
a government program that really might help. The National Cancer Institute's $100 million SBIR (Small Business Innovation Research Program) is promoting a new "bridging" program to try to carry projects that it has previously funded in early formation through the ominous "valley of death" period as the developers face the first tough requirements of preparing for contact with the Food & Drug Administration.
The NCI program's program director for therapeutics development, Ali Andalibi, was at a BIO breakout session in Atlanta on May 21 to spread the word about NCI's new largess. Andalibi was quite convincing: the center has money allocated to the bridging program (up to $10 million during the current fiscal year) and a practical model that involves trying to bring in private money and regulatory skills to make sure that projects don't die on the vine after two rounds of initial NCI funding support.
Andalibi, who has worked in academia, the biotech sector and for the National Science Foundation's SBIR program prior to joining NCI, has the range of different perspectives on government funding and resource support that could be very valuable to cancer start-ups.
As close FDA watchers, it particularly impressed us that NCI is adding regulatory consulting into its package of assistance for the start-ups. That's often a missing ingredient at that point in development. NCI wants to help the start-ups get through IND filing and safety testing before turning them loose for full private funding.
NCI and FDA have not always seen eye-to-eye on commercialization requirements, but they have been much closer partners in recent years. It cannot hurt fledgling private companies to have the assistance of NCI in finding the right advisors and coaching on regulatory strategies.
NCI is selling this new funding proposal to a relatively small group of potential prospects: only those firms that have received previous awards: Phase I (R41, R43, six-month feasibility studies) and Phase II (R42, R43 up to two-year projects with commercialization plans). The bridging grants are patterned after Phase IIB funding from NSF.
The government expects the developers to raise private money to supplement the new bridging loans. Andalibi says NCI will try to help locate angel funding sources. The private money is important to NCI as it also brings in the closer oversight and rigor of the investor community.
NCI has been selling the idea of bridging funding for at least eight months. It will be interesting to follow the projects that take advantage of the funds and to see whether a little help and advice from one of FDA's government cousins can move more projects through the IND and early human trials period.
GSK’s Tempero: Pushing Entrepreneurialism to the Limit?
We’re not sure why they didn’t shout about it, but GlaxoSmithKline has, according to a report in Xconomy last week, stealthily launched Tempero Pharmaceuticals, a Cambridge, MA-based start-up focused on regulatory T-cells for treatments in auto-immune disease and inflammation.
Jose Carlos Gutierrez-Ramos, head of the Immuno-Inflammation Center of Excellence for Drug Discovery at GSK that has seeded this newco, had flagged up the project to IN VIVO for this February feature. We blogged it here, too, but heard nothing since.
And yet “this is a very exciting project for us,” JC confirmed today to The IN VIVO Blog. Indeed, Tempero—though not technically a spin-out—takes GSK’s ongoing Drug Performance Unit (DPU) R&D experiment a step further. Need a refresher? The Big Pharma is already trying to foster a biotech-like culture internally, through the creation last year of these small, pathway-focused DPUs, each on a three-year funding cycle overseen by an investment board that includes a couple of external CEOs and VCs too.
Tempero, though, is (or will be) a fully external DPU—the plan is to bring VCs in on a later B round. If they come, that would provide the sort of outside validation GSK’s after for what will become GSK assets. Gutierrez-Ramos explained in February that GSK will buy back those investors at a certain return—granted, presumably, clinical milestones are met—thus providing them with a pre-determined exit.
"Pre-determined exit" and "certain return" probably sound rather sweet these days to VC ears. The devil is in the detail---figuring out what return will be enough for the VCs, and worthwhile for GSK. And the timeframe for all this.
GSK isn't commenting on any of those questions, or indeed on Tempero, other than to say that:".....GSK has created a new Discovery Performance Unit which will be a separate company dedicated to researching and discovering small molecule drug candidates targeted to regulatory T-cells and effector Th 17 cells, which are thought to play a key role in autoimmune diseases. We believe its planned status as a stand alone company will stimulate innovation and provide the flexibility to respond to research leads, thus creating the best chance of success."
Of course, the point for GSK is to share more R&D risk, as it and other Big Pharma are doing as much as they can, including via the increasingly popular option-based deal structure. In this case, though, rather than share risk with an existing biotech partner, GSK has created one itself and gone directly to VCs to unload risk—since it apparently couldn’t find an existing company with the focus it was after.
Gutierrez-Ramos earlier described the Tempero set-up as “pushing entrepreneurialism to the limit,” and “forcing these guys [within the company] to deliver.” Just how much forcing the external VCs will need isn’t clear, but hopefully GSK will have more to say at that point.
image by flickrer su-lin used under a creative commons license
