Wednesday, June 30, 2010

This Charming CEO

Well, well, well. Of all the people to replace CEO Jim Mullen, the ever-more-Icahnized Biogen Idec tabbed George Scangos, the chief of Exelixis. Scangos' replacement is less of a surprise (small hint above), but more on that in a moment.

There are plenty of fun juxtapositions -- East Coast/West Coast, rumpled Mullen/dapper Scangos -- but one that can't be waved away is that Biogen Idec is squarely a commercial company, squeezing as much revenue as possible from its multiple-sclerosis leader Avonex and turning more and more to business development to bolster its pipeline; while Scangos, for all his revving of Exelixis' oncology discovery engine, has never brought a drug to market, let alone run a four-billion-dollar commercial operation.

"The Pink Sheet" Daily will dissect the major move in greater detail, so we don't want to steal our sister publication's thunder. [UPDATE: Here's the PSD piece.] Meanwhile, we point you to the other man behind the Exelixis engine, Michael Morrissey, the R&D chief who now steps into Scangos's CEO shoes.

Morrissey? We can't help wonder which song he'll use to take the stage at his first investor conference as CEO...

"A Rush and a Push and the Kinase is Ours"
"How Soon is NDA?"
"Please Please Please Let Me Get XL184 Approved"
"Panic" (Hang the VP, hang the VP, hang the VP...)

Feel free to suggest your own. If you're not a Smiths fan, just tap your foot to whatever song is in your head.

Photo courtesy of flickr user Djenan.

VEGF & Colorectal Cancer: How Do You Know When to Stop?

Fifty million Elvis fans can't be wrong. What about nine Phase III trials?

Avastin is a $5.7 billion drug, with activity in at least five tumor types with every indication of gaining more (it's pending for approval in gastric cancer based on data presented at the 2009 ASCO annual meeting [it is not (Herceptin is!); IVB regrets the error] and positive data in ovarian cancer was presented at the plenary of the 2010 meeting). Some projections have it becoming the top selling drug in the world in 2014 with annual sales of $9 billion. (For more on Avastin's performance in ovarian cancer, check out "The Pink Sheet.")

But it all started out with colorectal cancer.

With success like that, and the VEGF mechanism of action seemingly proven in the setting, of course other drug development projects followed. "There is clearly room to improve on anti-angiogenic therapy in CRC," Scott Kopetz from MD Anderson Cancer Center said at this year's ASCO meeting, and agents with oral bioavailability and lower production costs could have real market advantages.

But, as Kopetz reminded us during an ASCO session on novel possibilities for treating colorectal cancer, small molecule angiogenesis inhibitor options – including the multi-targeted receptor tyrosine kinase inhibitors – haven't worked. Fourteen small molecule VEGF receptor antagonists have been tested (and failed) in CRC – among them early disappointments like AstraZenenca/Schering's PTK787 and more recent failures with Pfizer's sunitinib, GlaxoSmithKline's pazopanib, Bristol-Myers Squibb's brivanib, and AstraZeneca's vandetanib and cediranib just weeks ago. (see Pharmaceutical Approvals Monthly). That includes a total of nine Phase III trials and over 10,000 patients studied, by Kopetz's calculations.

And - "despite over 10,000 patients enrolled," he said, "unfortunately there's no evidence yet that anti-angiogenic agents, besides bevacizumab, confer benefit."

With such a host of attempts and no positive results, maybe it's time to move beyond VEGF in colorectal cancer. After all, there's scads of other pathways to pursue – from MEK to PI3 kinase to Src to Notch to Hedgehog, as Wells Messersmith from the University of Colorado mapped out.

Maybe it isn't quite time to call it quits on angiogenesis, though. Kopetz held out a little hope – and from the back of a McCormick Place hangar it was hard to see how much of a veil of Avastin glory was in his eyes – there's still the large molecule angiogenesis projects out there.

The Phase III on VEGF-Trap, sanofi-aventis/Regeneron's aflibercept, should report out in December. So perhaps we should all keep our hopes up a little longer.

Monday, June 28, 2010

While You Were Getting Eliminated

Ah, the World Cup Not a pleasant weekend to be an American or English fan of the beautiful game; we could, um, parrot the experts, but we'll spare you. Let's just say it was very disappointing. Of course if you read the press in England, you could be forgiven for thinking it was the end of the world.

But life goes on. ADA continues this week in Orlando -- plenty of GLP and insulin news, below -- and our very own EuroBiotech Forum starts Tuesday in Paris. It's not too late to sign up for two days of partnering and excellent content, including keynote talks from Novartis Pharma CFO Jonathan Peacock and Teva Pharmaceuticals Europe president and CEO Gerard van Odijk.

While you were watching the drugs that watch your blood sugar ...

  • Morphosys has licensed a Phase I anti-CD19 antibody from Xencor. The last time we checked in with Morphosys regarding its in-licensing ambitions, CEO Simon Moroney told us "The review isn't complete and we're optimistic, but the ground isn't littered with jewels." We're glad they finally found something shiny enough to pay $13mm u/f for. Xencor will run Phase I for what is now known as MOR208 and then Morphosys picks up development, paying Xencor milestones and royalties on worldwide sales.

  • Will Novartis need to up its bid for the eyecare giant Alcon? That company's independent directors committee certainly thinks so, and it has an expert backing it up, reports Reuters.

  • Boehringer Ingelheim will work with Marinomed to commercialize in various markets an OTC nasal spray for the common cold. Marinomed gets about €1 million u/f and could receive milestones based on market entry and royalties.

  • AstraZeneca and Medicines for Malaria Venture announced a partnership whereby MMV will have access to AZ's compound library for discovery efforts against malaria parasites.

  • ADA: Novo Nordisk's diabetes drugs were on display at ADA -- liraglutide bested Januvia as an add-on to metformin and proof of concept achieved for ultra-long-acting insulin Degludec. Analysts report this morning that Novo also began talking about liraglutide Depot, a longer-acting version of the peptide.

  • ADA: BMS and AZ put out a trio of releases on Saturday with Onglyza and dapagliflozin data. Onglyza and metformin as first line combo therapy? Check. Onglyza/metformin non-inferiority study vs glipizide/metformin? Check. Dapagliflozin add-on Phase III? Check.

  • ADA: There's plenty more from Byetta, Januvia, canagliflozin, taspoglutide and all your other favorites. News roundup here.

image from flickr user baldheretic used under a creative commons license

Friday, June 25, 2010

Deals of the Week in a Parallel Dimension

It's ADA season, and this week didn't disappoint with diabetes deals coming out of the woodwork. But if FOTF can go a little off-piste, permit your favorite deals roundup to stray as well , straight into uncharted regulatory and reimbursement territory. (We promise to get to the juiciest deals eventually.)

This week FDA and CMS agreed to routinely share data in what could serve as a first step toward parallel reviews by FDA and CMS for marketing approval and medicare coverage. We're already seeing reimbursement milestones popping up in deal terms, and we can imagine that a parallel review by the massive government insurer would only mean they'd be even more common.

To be sure this isn't a new discussion, as our colleagues from "The Gray Sheet" wrote this week. But there may be more substance to this new effort, under which the agencies are "seriously exploring the ability to start, at a manufacturer's request, a Medicare national coverage determination process" while a medical device is under FDA review. That remark, from FDA center for devices and radiological health director Jeff Shuren, was made before a device-oriented audience, but he clarified that the memorandum of understanding between FDA and CMS will apply "FDA-wide."

Hmmm. Who will be the first to channel his/her inner Ray Stantz and order FDA and CMS to "cease any and all supernatural activity and return forthwith to your place of origin?"

Before we get to the deals this week please allow us a moment to say GOOOOOOOOAAAAALLLLLLL!

Oh and yes, we did the movie thing last week, but it's hard to resist this one. We had the same reaction as Derek Lowe to the idea of Lilly launching a statin in 2010 -- surely someone threw us in a DeLorean, cranked up the Huey Lewis, scored some Lybian plutonium and sped up to 88 miles per hour, because we all went Back to the Future this week.

Never mind that Biff guy, it's time for ...

Sanofi/Regulus: Sanofi-Aventis made its first foray into the emerging microRNA field by forging a collaborative development agreement with Regulus Therapeutics, a startup co-owned by publicly traded Alnylam Pharmaceuticals and Isis Pharmaceuticals. For an upfront payment of $25 million and an equity investment of $10 million, Sanofi received options to license four Regulus compounds, beginning with a co-development agreement targeting fibrosis. If all milestones are reached on all four, Sanofi could pay Regulus more than $750 million; Sanofi also has a $50 million option to expand the partnership into a broader alliance that to us recalls the first broad RNAi deal between Alnylam and Novartis. MicroRNAs regulate gene expression by binding to target messenger RNA transcripts and developers hope that disruption by a single microRNA can interfere with disease pathways. Nearly all microRNA-based therapies have yet to reach the clinic. Regulus, which has programs in oncology, cardiovascular and metabolic diseases, also has two separate partnerships with GlaxoSmithKline. One gives GSK four options in Regulus’s immunological and inflammatory disease portfolio, and the other pertains to a specific hepatitis C treatment. The deals collectively are a sign of Big Pharma’s renewed interest in innovative early-stage technologies.--Paul Bonanos

Valeant/Biovail: While complementary lines of business played an important role, it was probably Biovail’s advantageous tax setup that led larger specialty pharma Valeant to merge with it in a deal announced June 21. Canada (and hockey?) will be a major focus for the newco – to be named Valeant Pharmaceuticals International but based in Biovail’s hometown of Mississauga, Ontario, rather than Valeant’s current home of Aliso Viejo, Calif. The new Valeant’s four main business areas will be specialty central nervous system (comprising Biovail’s CNS franchise and Valeant’s neurology business), dermatology, Canada, and branded generics/emerging markets. Valeant CEO J. Michael Pearson, who will run the new company, said each firm currently has a roughly $100 million business in Canada, and both are experiencing a better than 20% growth rate. Asked to estimate what the new company’s effective tax rate would be, Biovail CEO Bill Wells, who will be chairman of the new company, said Biovail currently pays in the 5 percent to 8 percent range. The combined company’s rate will be somewhat above that but far below Valeant’s tax rate of 36 percent, he said. Biovail has done its manufacturing in Canada, generating excess net operating losses. Now, those NOLs will help shelter Valeant’s considerable income in Canada. The new company also will retain Biovail’s principal subsidiary in Barbados, where intellectual property is developed, funded and managed, taking advantage of that country’s very low tax rates. The merged company also should realize $175 million in cost synergies in 2011 before tax savings are even factored in, derived partly from combining commercial operations in Canada, which will detail both specialty and primary care products.—Joseph Haas

J&J/Metabolex: Metabolex's first deal this week sees Johnson & Johnson taking time out from their OTC recall issues to boost its diabetes pipeline. In addition to licensing a type 1 diabetes vaccine from Swedish biotech Diamyd (see below), J&J's Ortho-McNeil-Janssen unit snapped up worldwide rights to several undisclosed first-in-class preclinical drug programs for type 2 diabetes from Metabolex. The deal is the companies' second, following on a 2006 alliance around two Metabolex PPAR-gamma programs, which are now both in Phase II development. In the current deal, Metabolex gets an undisclosed up-front payment and the typical assortment of development, regulatory and sales milestones plus royalties. If the stars align, the biotech could see up to $330 million.--CM

J&J/Diamyd: The same day OMJ inked its deal with Metabolex it also signed up Sweden's Diamyd, paying $45 million up-front for that company's Phase III type-1 diabetes vaccine. The vaccine could slow or halt the disease by protecting insulin producing pancreatic cells. Development and commercial milestones on the deal total $580 million, and Diamyd is eligible for tiered royalties on potential sales. The companies are sharing the costs of the vaccine's ongoing EU Phase III trial, and J&J can take over development if it chooses based on the results of that study. J&J's strategy is clearly one designed to leverage its presence in diabetes devices -- it does not market any diabetes drugs, yet, but its two deals this week augment an internally and externally sourced suite of compounds the roots of which goes back at least ten years to a research deal with Mitsubishi-Tanabe in 2000. --CM

Sanofi-Aventis/Metabolex: Sanofi-Aventis may not be making big news at this year's 70th Scientific Sessions of the American Diabetes Association but that doesn’t mean it isn’t creating its own buzz—and no vuvuzelas required. On June 25, the company announced its third deal since March 31 in the diabetes space, becoming the second pharma to ink a deal this week with Metabolex. The global licensing agreement is for the biotech’s Phase II, oral GPR119 receptor agonist, MBX-2982, for the treatment of type 2 diabetes. Specific deal terms of the Sanofi partnership weren’t disclosed but biobucks could total $375 million. It’s no secret that Sanofi has grand ambitions to become one of the leading players in diabetes but to do that, the company will need to diversify beyond its juggernaut Lantus. As Sanofi bolsters its pipeline, the focus has been on novelty and diversification—the March alliance with Agamatrix gives the French firm a foot in the blood glucose monitoring space; the tie-up with privately-held CureDM gives Sanofi a potentially first-in-class compound in the islet cell regeneration space. Agonists of GPR119 represent a first-in-class oral treatment for type 2 diabetes that simultaneously increase insulin secretion while stimulating the release of GLP-1 from the intestines. (They are also an au courant target as evidenced by last week’s deal between Neurocrine and Boerhinger Ingelheim.) —Ellen Foster Licking

Gilead/CGI: Finding a use for some of the $4.6 billion of cash it has on hand and also seeking some diversification beyond the antiviral space, Gilead Sciences June 25 announced that it would buy privately held CGI Pharmaceuticals for up to $120 million in cash. Gilead said the majority of the payment would be an upfront purchase price with the remainder paid out in clinical development milestones but did not break down the exact amounts. CGI, formerly known as Cellular Genomics, has nothing in the clinic but is doing discovery and development in three platform areas, of which Gilead seems most intrigued by its spleen tyrosine kinase inhibitor (Syk) program, which includes a lead preclinical compound with potential to treat rheumatoid arthritis. Under the deal, CGI would continue operating as a fully-owned Gilead subsidiary at its current headquarters in Branford, Conn. Gilead Chief Scientific Officer Norbert Bischofberger cited CGI’s scientific expertise as “a strategic fit with Gilead’s existing research organization” and said Gilead will work to move CGI programs into clinical development. Standard & Poor’s analyst Steve Silver called the transaction a “modestly priced opportunity to broaden Gilead’s long-term pipeline.” GCI's backers are probably seeing about a 2x multiple on the deal, should those milestones materialize; the company had not raised money since a 2004 Series C led by Lilly Bioventures that brought in $34.9 million.—JH

Bristol-Myers Squibb/Exelixis: Exelixis revealed June 21 that Bristol is walking away from its late-stage partnership on the biotech's lead compound XL184, a multikinase inhibitor in Phase III trials for medullary thyroid cancer (MTC). GlaxoSmithKline had an option on '184 but passed in late 2008, soon after which Bristol swooped in with a lucrative deal, $240 million in upfront and near-term milestones. With Bristol's decision, the question becomes whether Exelixis can find another home for the drug. It insisted the data were sound, and officials on both sides of the no-deal talked vaguely about portfolio conflicts and pipeline reviews. Two investigators working on XL184 trials told "The Pink Sheet" they knew of no clinical problems serious enough to merit BMS's decision, but some analysts were skeptical that Bristol would give up rights, given what it has already spent, on a drug with serious potential. Fresh from layoffs of nearly 30% of staff, Exelixis said it will push on with XL184 and start a Phase III trial in glioblastoma by the end of 2010 and file an NDA for MTC in the second half of 2011. The firms' partnership on XL281 remains intact. -- Emily Hayes

Image courtesy of flickrer TheAlieness GiselaGiardino23.

Monday, June 21, 2010

While You Were Calling the Old Man

A belated happy fathers day to all you dads out there, and a happy solstice to the rest of you. The news this weekend was largely confined to spills of oil and sports, but we've dug out a few noteworthy tidbits from this morning to get you started this week.

While you were diving/collapsing/going Gaga ...

  • Biovail and Valeant are merging. The nearly 50/50 transaction is a bit complicated but suffice to say the two specialty pharma companies will combine operations under the Valeant banner but with Biovail's corporate structure and HQ'd in Canada. Valeant investors (who will hold 49.5% of the newco) get a one-time payout of $16.77 per share plus 1.7809 shares of Biovail for each share of Valeant. Valeant CEO J. Michael Pearson will become CEO of the newco while Biovail CEO Bill Wells will become chairman.
  • Affymax and Takeda released this morning their top-line Phase III results for Hematide -- all looks good except for the adjusted cardiovascular composite safety endpoint in non-dialysis patients in two of the four pivotal trials ...
  • Sosei is acquiring Japanese drug formulation company Activus for 500 million yen.
  • GSK has licensed rights to a topical lip-patch from Germany's Labtec GmbH for the treatment of cold sores.
  • And finally ... Exelixis has regained full development and commercialization rights to its Phase III MET/VEGFR2/RET inhibitor from partner Bristol-Myers Squibb Co. BMS entered a 50/50 dev-co arrangement for '184 as part of a deal signed in December 2008 that also included the Phase I cancer candidate XL281. Both drugs had been passed over by GSK when its broad option-alliance with Exelixis ended earlier that year. As part of this weekend's breakup BMS will pay Exelixis $17 million. There has been no major hiccup in '184's development, and the drug is in testing in more than a dozen tumor types. So what happened? As part of the 2008 agreement, goes Exelixis' statement, "BMS and Exelixis had originally agreed to certain clinical development plans, and Exelixis maintained key rights regarding timing and funding of current and future clinical trials. Given the recent progress of BMS’ wholly-owned oncology pipeline and positive data generated by XL184, Exelixis and BMS were not able to align on the scope, breadth and pace of the ongoing clinical development of XL184." The companies will continue to work together on other oncology candidates.

Friday, June 18, 2010

Deals of the Week Goes Hollywood

It's not every day that a biopharma company swaps dreams of developing a blockbuster for dreams of developing a different sort of blockbuster (GSK's documentary dreams notwithstanding) but today ImaRx Therapeutics is doing just that. The erstwhile vascular therapeutics play was trading about 99% off its IPO price last we checked in -- investors had seemingly given up on blockbusters of the first variety.

Well, say goodbye to ImaRx, now just a shell of a company anyway. Say hello to Sycamore Films.

Sadly it's unfortunately not very uncommon for a biotech to meet its demise, especially in today's environment. But it did get us thinking. If the biopharmaceutical industry were a movie, what would it be? (C'mon people, it's Friday.) The first one that springs to mind for this blogger is Risky Business. (Of course the medical devices world needs its own movie too: this bit of Medtronic news has us thinking about the end of Se7en ... "what's in the box??!?!")

Your suggestions in the comments, pls. Meanwhile, not so long ago in a conference room not so far away . . .

Gen-Probe/Pacific Biosciences: Molecular diagnostics provider Gen-Probe, one of the original developers of nucleic-acid-based diagnostic test platforms, is getting into the sequencing game, via a $50 million investment in privately held Pacific Biosciences, part of the sequencing company’s Series F. The companies will also co-develop systems based on PacBio’s single-molecule sequencing technology aimed at the clinical diagnostics market. They will work exclusively with each other for two-and-a-half years on the program. Several other companies including IBM, Illumina, Life Technologies, Oxford Nanopore Technologies, and newcomer Ion Torrent are developing real-time, single-molecule sequencing technologies, with some geared towards eventually being able to look at the entire human genome. The move by Gen-Probe appears to be part of a strategy gaining favor with life science tools providers to provide an integrated sequencing offering including sample prep, sequence measurement, assays, and perhaps even bioinformatics in one package. Expectations are that technical validation of these systems will come in the next five years, and with sequencing costs rapidly decreasing – one start-up recently suggested the capability for whole-genome sequencing at under $100 around year-end – the clinical diagnostics market appears to be within reach for these companies. --Mark Ratner

Tranzyme/Norgine: In seeking a European development and commercialization partner for ulimorelin, a ghrelin agonist about to enter Phase III in gastrointestinal dysmotility disorders such as post-operative ileus, Tranzyme Pharma thinks it found the perfect fit. Tranzyme’s June 16 tie-up with Netherlands-based Norgine BV includes only $8 million up-front. But more importantly to the North Carolina biotech, the deal leaves it with North American rights to its lead program, while Norgine obtains rights in Europe, Australia, New Zealand, the Middle East and Africa. In addition to Norgine’s focus on gastrointestinal disorders, CEO Vipin Garg said one of the factors he likes best about the partnership is the regional nature of the deal and in particular that Norgine is “pan-European” rather than specializing in its home market or just a few countries. “A lot of companies want worldwide rights nowadays for products [or] just US or North American rights," told “The Pink Sheet” DAILY. “In our case, we wanted to retain those rights for ourselves and perhaps partner them later or even have the ability to build a small sales force” to sell the drug to hospital-based docs. Beyond the upfront payment, Tranzyme also is eligible to earn up to $150 million in development, approval and commercial milestones; Garg would not break down the biobucks specifically other than to say that the first milestone would be realized upon completion of the first Phase III trial.—Joseph Haas

Bayer/OncoMed: OncoMed Pharmaceuticals pulled in an eyebrow-raising $154 million Series B round in 2008, but investors apparently aren't the only ones that think the company is on to something. The cancer stem cell-focused biotech has signed its second major pharmaceutical collaboration – the only two significant deals in the space to date. The Redwood City, Calif., firm received $40 million upfront June 17 from Bayer Schering Pharma to co-discover and co-develop five agents that target the Wnt cancer stem cell pathway. The new partnership follows a 2007 deal with GlaxoSmithKline in which privately held OncoMed received an undisclosed upfront payment and equity investment in exchange for option rights to four monoclonal antibodies targeting the Notch cancer stem cell pathway. With potential discovery, development, regulatory and sales milestones, the deal with GSK was valued at up to $1.4 billion. The Bayer/OncoMed tie-up is similarly risk-adjusted: for starters, the German pharma gets an option to license development and commercial rights to antibody and protein therapeutics developed under the collaboration up through completion of Phase I. OncoMed can receive up to $397.5 million in milestones for each antibody or protein therapeutic developed and commercialized successfully, along with double-digit sales royalties. OncoMed will also assist Bayer in developing small molecule cancer therapies that target the Wnt pathway, which could earn it up to $112 million per successful candidate.--JAH

Neurocrine/Abbott: Less than a month after Neurocrine Biosciences said it was seeking a partner to advance into Phase III its novel gonadotropin-releasing hormone (GnRH) antagonist, elagolix, it sealed a deal with Abbott. Abbott agreed to pay $75 million upfront to develop and globally commercialize elagolix for the treatment of endometriosis-related pain, and undertake Phase II studies for the treatment of uterine fibroids. Neurocrine, a bit of a comeback tale since losing lead asset indiplon a few years ago, also could earn up to $500 million in milestones, mainly tied to pre-commercial achievements, and will receive undisclosed sales royalties. In addition to endometriosis and uterine fibroids, Neurocrine believes elagolix could be used to treat prostate cancer and benign prostatic hyperplasia, since the drug lowers testosterone levels in men. Though Neurocrine had been in talks with several potential partners, Abbott's experience with the GnRH mechanism made it an ideal fit, President and Chief Executive Kevin Gorman told “The Pink Sheet” DAILY. Abbott sells Lupron (leuprolide), an injectable GnRH agonist, which is one of two approved therapies for endometriosis. Leuprolide also is indicated to treat prostate cancer, which Gorman said adds value to the deal since elagolix is in preclinical studies for this use.--Carlene Olsen

Neurocrine/Boehringer Ingelheim: Sequels aren't usually as good as the original and this is frankly no exception. But Neurocrine's second deal this week, announced less than a day after its deal with Abbott, is nothing to sniff at either. Neurocrine on Thursday inked a pact with Boehringer Ingelheim to discover and develop small molecule GPR119 agonists to treat type-2 diabetes and other indications. Neurocrine gets $10 million up-front plus research funding and is elgible for development, regulatory and commercial milestone payments and royalties on any products BI develops from the collaboration. GPR119 is a GPCR thought to play a variety of roles in inducing insulin secretion; BI has made no secret of its desire to become a player in diabetes, though it hasn't done many deals. --CM

Covidien/Somanetics: Call it the Covidien Creep. Just as the medical device company moved slowly into the vascular and neurovascular business with the successive acquisitions of Bacchus Vascular, VNUS Technologies and this month's $2.6 billion acquisition of ev3 Inc., Covidien now is building its oximetry and monitoring products with its second sizable acquisition in less than a year with the purchase of publicly traded Somanetics Inc. Covidien agreed to pay $250 million, or $25 per share, for the company, seller of the INVOS System, which measures blood oxygen levels in the brain of surgical patients so clinicians can detect and correct a variety of threatening complications. The technology pairs nicely with the Bispectral Index, the only system capable of measuring the effects of anesthesia and sedatives on the brain. Covidien added the Bispectral to its oximetry and monitoring group last year by acquiring Aspect Medical Systems Inc. for $210 million. The combined revenues from Aspect and Somanetics will add $150 million in annual revenue to the Oximetry and Monitoring group, which reported $636 million in revenue in each of the last two fiscal years. Even with the additional revenue, oximetry and monitoring will likely be the fourth largest in Covidien’s medical device unit but that could change with future acquisitions.--Tom Salemi

Basilea/Almirall: Switzerland's Basilea Pharmaceutia has signed on Spain's Almirall to be the exclusive distributor of Basilea's eczema treatment Toctino (alitretinoin) in 10 European markets and Mexico. Now Basilea can benefit from broader sales of Toctino without making costly investments to build its own commercial infrastructure in Austria, Belgium, Czech Republic, Italy, Luxembourg, Mexico, the Netherlands, Poland, Portugal, Slovakia and Spain. At the same time, Almirall, a top 10 dermatology country in Europe, gains a novel therapy for its portfolio – Toctino is the only therapy approved for adults with severe chronic hand eczema unresponsive to potent topical corticosteroids. Almirall will make an upfront payment of €5 million, and Basilea also could receive milestone payments related to the launch of Toctino in two key markets of up to €11 million, plus €11 million more in pre-specified sales milestones. Basilea also retains the right to co-promote Toctino in selected markets. Though Basilea would not disclose its transfer price for Toctino, Merrill Lynch analysts estimate that the biotech will receive 44 percent to 55 percent of the product's revenues generated in Almirall's distribution markets. Toctino's fortunes are especially important for Basilea given the high-profile failure and break-up with Johnson & Johnson over its next likely commercial candidate, the anti-infective drug ceftobiprole. Since then, the biotech has made aggressive moves to regain its footing, including a licensing deal with Astellas Pharma earlier this year. --CO

image from flickr user emma.kate used under a creative commons license

Managed Care Has More Faith in the Big Pharma Model Than Big Pharma Does

That, at least, is the lesson we took from a preview of Quintiles’ new survey of biopharma executives, managed care executives and consumers released June 15. Dubbed The New Health Report, the survey includes some interesting data on different perspectives about Big Pharma business development activities.

Including this nugget: To the question, “What is the impact of large biopharma mergers on innovation?” 53% of biopharma execs said they reduce opportunities for innovation, versus only 15% who see mega-merger as improving innovation; on the other hand, 39% of managed care executives see mega-mergers as improving opportunities for innovation, versus 37% who see them reduced.

In other words, more managed care executives seem to be believe that consolidation in the Big Pharma sector will improve R&D productivity than do biopharma execs.

There’s more.

Quintiles also surveyed attitudes about other business development and structural trends in pharma, asking whether each group expects to see more partnerships, more mergers, more focus on emerging markets, and more outsourcing.

In each case, biopharma executives see doing more—in essence, painting a picture of an industry that relies on external R&D and external (ie, non-US/EU) markets. That’s no surprise, especially to readers around here.

Managed care execs, on the other had, were less likely to predict “more” of those activities. (See chart).

Put another way, they appear to have greater faith that pharma companies can deliver sufficient returns on their own and in established markets than do industry executives themselves. (Or, perhaps, they have greater skepticism about biopharma companies’ ability to follow-through on their intentions to look outside.)

Those discrepancies are interesting, but we sure don’t know what to make of them. Are biopharma companies doing a better job of putting on a brave face about R&D productivity when they talk to their customers than they are with their own employees? Or do “outsiders” with a big stake in the industry have a better read on how business development activities really play out?

What do you think? We invite your comments.

PS. There is much more in the Quintiles report on attitudes about the industry; the full report is available here.

Thursday, June 17, 2010

Financings of the Fortnight Follows the Money Wherever It Goes

Your IN VIVO blog crew is a motley crew, and rarer will you find a motlier crew, at least not without umlauts. Collectively, we dig deeply into pharmaceuticals, medical devices, regulatory policy, reimbursement, and Philadelphia sporting activities. We've even been known to riff extemporaneously on the vuvuzela. Sorry about that.

Despite IVB's polyglot ponderings, Financings of the Fortnight tends to keep it tight on the pharma side. Once in a while we veer into devices or diagnostics, but generally the drug folks keep us hopping. This might change. It's no secret there's a shakeout in biopharma investing. Despite glimmers of economic recovery, first-quarter investment in drug-focused biotechs hit its lowest total, $619 million, in at least five years, according to Dow Jones Venture Source. And industry stalwarts are having trouble raising their next funds.

One axiom of reporting is "follow the money," so we'll be watching to see if some of the cash previously earmarked for drug startups goes into other life-science sectors or leaves health care completely. There's no hard evidence for this trend yet. First-quarter totals for medical services, devices and software were lower than nearly every quarterly total over 2008 and 2009. In other words, if there's a shift on, it didn't happen by the end of the March.

Even without the data, there's been plenty of intense conversation on the subject, as IVB guest blogger Steve Dickman noted last week. Dickman made a case for molecular diagnostics as the next field where VC might reap decent exits. You might point to the top-up round for Predictive Biosciences, a diagnostic firm with near-term commercial hopes which we describe below, as another sign that VCs are eager to pile into near-term exit opportunities. Then again, you might be Harold Varmus, who sounded a cautionary note about genomic exuberance in the May 27 New England Journal of Medicine. (Link tip from Merrill Goozner's GoozNews.)

Or, if you're looking for ripples that signal movement below the surface, perhaps you fancy the $60 million C round for Castlight Health, a consumer comparison-shopping tool for health care that's gotten quite a bit of ink this week. Veteran biopharma investor Bryan Roberts of Venrock was part of Castlight's syndicate, and IVB asked him if VCs are putting money into health services at the expense of biopharma or device investments.

Roberts demurred, noting "it's not really a matter of one or the other," but he did voice a common refrain: drug investing is getting harder because of regulatory and reimbursement uncertainty. (A perfect example: antibiotic developer Trius Therapeutics put its IPO on hold in March because it couldn't square away a protocol for a crucial Phase III trial. Trius announced June 16 it has reached agreement with FDA, though it didn't say when -- or if -- the IPO would get back on track.)

As Trius's travails suggest, the oft-discussed but elusive goal of capital efficiency seems even more elusive. And that could argue for service type investments. Of course, it helps if you can make money doing it--and Venrock's Roberts points to the 2007 IPO of Athenahealth, a maker of revenue-tracking software for doctors, as exhibit A in support of that thesis. Sure, anyone dreaming of IPO riches these days is likely to wake up with a cold wind blowing through the screen door. But with Uncle Sam and everyone else looking for better ways of treating sick people and keeping healthy people healthy, there could be acquirers aplenty looking for the right tools and services to make health care reform a reality.

We can't wait to look back six months from now to see if healthcare IT and molecular diagnostics have drawn more venture support. Meanwhile, the best way to keep following the money is to stick with...

Predictive Biosciences: More oncology molecular diagnostics are edging towards the market with VC backing. The latest is from Lexington, Mass.-based Predictive, which announced June 16 a $25 million C round led by new investor ProQuest Investments. All four current investors also chipped in. The cash will help Predictive complete two prospective, 1,000-patient clinical trials and bring to market its first product: a non-invasive bladder cancer assay based on its CertNDx platform, which detects protein and DNA biomarkers present in urine. Predictive is already working on distribution; in January, it bought a CLIA-certified lab, OncoDiagnostic Laboratory in Cleveland, and plans to roll out the bladder cancer test through a nationwide network of pathology and molecular diagnostics labs. Predictive last December licensed for an undisclosed amount the diagnostic rights to Fibroblast Growth Factor Receptor 3 (FGFR3) from several French health-care systems. It is combining the FGFR3 DNA biomarker with matrix metalloproteinase (MMP) protein detection in the bladder-cancer test. Flybridge Capital Partners, Highland Capital Partners, Kaiser Permanente Ventures and New Enterprise Associates are the returning investors, and Flybridge's Michael Greeley is the firm's chairman. Predictive previously raised nearly $32 million in two early rounds.-- A.L.

Castlight: Castlight’s $60 million Series C is one of the top venture financings of 2010 and the largest mid-stage C-round year to date. (Others include the respective $56 million and $45 million raises by Achaogen and Tetraphase.) The deal is noteworthy not just for its size but the diverse group of backers, which includes new and non-venture players such as the Wellcome Trust and the Cleveland Clinic, plus the company’s previous supporters Maverick Capital, Oak Investment Partners, and Venrock, as explained above. Castlight, founded in 2008 as Ventana Health Services, is a Web-based service aimed at letting employees compare out-of-pocket costs for procedures such as colonoscopies, X-rays or MRIs. While the service is for now geared toward providing intel on procedures, it looks to include information about pharmaceuticals, dental and eye coverage. The technology relies on complex algorithms to crunch claims data and calculate the costs to a consumer based on specific treatment decisions. In addition to a commercial buildout, part of the $60 million will go toward creation of assessments of that ever-elusive metric: the quality of care being delivered.--Ellen Foster Licking

Agile Therapeutics: The contraceptive maker said June 14 it has amassed $45 million to push its lead product into long-delayed Phase III trials. Dubbed AG200-15, the patch transmits both ethinyl estradiol, a form of estrogen, and levonorgestrel, a synthetic progestin, through the skin. It called the round a Series B, when in fact it was the first round after the firm quietly recapitalized late last year. Investor Growth Capital, a unit of Sweden's Investor AB, and Care Capital were co-leaders of the round, which also featured first-time backer Kaiser Permanente Ventures and previous investors Novitas Capital and ProQuest Investors. At least two early investors, TL Ventures and The Hillman Co., declined participation. The firm said nearly two years ago it was readying the patch for Phase III trials after reporting positive Phase II data, but the program was delayed. CEO Thomas Rossi declined to discuss specifically the Phase III delays. Rossi was previously with Johnson & Johnson and worked on the Ortho-Evra contraceptive patch that bears a black-box warning for blood clotting issues and has raised the ire of public-health watchdogs. Agile's chief medical officer told The Pink Sheet DAILY, the company's delivery technology allowed greater amounts of the progestin to pass through the skin than in existing patches, while its lower estrogen dose could remedy the clotting problems.-- Paul Bonanos

Genzyme: Putting in motion a plan it announced at last month’s investor day to buy back $2 billion of its stock, Genzyme will sell a pair of private debt offerings totaling $1 billion to fund the first tranche of the buyback effort. Slated to close June 17, the offering will consist of $500 million 3.625% senior notes due in 2015 and $500 million of 5.0% senior notes due in 2020. Genzyme says it will sell the debt to qualified institutional investors inside and outside the U.S. With shares down about 16 percent the past year, due in large part to manufacturing woes, Genzyme outlined the share buyback program May 6 as part of a five-part plan to increase shareholder value. CFO Michael Wyzga, asserting that the biotechs shares are undervalued, said Genzyme will purchase $1 billion of stock in the short-term, with plans for buying up another $1 billion by 2015. These purchases will be in addition to nearly $800 million in shares purchased under a 2007 buyback plan.--Joseph Haas

Otonomy: The San Diego hearing-loss startup said June 11 it raised a $10 million Series A from Avalon Ventures to continue its Phase I trial of lead compound OTO-104 for Meniere's disease, an inner ear disorder, and to fund preclinical work. That's roughly average for biopharma A rounds this year, not bad for a firm in a therapeutic field that drug makers have ceded to the device world, as our Pink Sheet colleagues noted recently. Is there pent-up medical need for pharmaceutical intervention? Note that the U.S. Department of Defense and Veteran's Administration together spend about $4 billion a year to cover hearing aids, tests, and evaluations for hearing loss and tinnitus. (There's also quite a market for aging rock stars.) Otonomy is openly pursuing partners for OTO-104 outside the U.S., but partnering deals in the hearing-loss space have been nearly nil so far. The only publicly-disclosed deal was in January. Novartis spent $5 million upfront for rights to GenVec's gene-therapy program to regrow hair cells in the inner ear. (Because of a different program, however, GenVec isn't doing so well.).-- A.L.

Photo courtesy of flickr user Andrew Turner.

Pfizer’s Adverse Event Reporting Warning Letter: Those Who Don’t Learn History…

Maybe its summer re-run season, or the fact that the hottest new movies are Karate Kid and the A Team, but we are feeling a lot of déjà vu lately.

An FDA advisory committee to review the safety profile of Avandia? We’ve definitely seen that before. A big pharma company in the hot seat for manufacturing/quality control issues? This time its J&J, but Schering-Plough and Wyeth and Warner-Lambert have all seen this movie before. (Hmmm…Though none of those three companies is independent anymore…)

But what really sealed the deal was this item: Pfizer getting a Warning Letter from FDA citing the company for failure to forward adverse event reports to the agency in a timely fashion. Not just the letter, but—as we noted in The Pink Sheet—the fact that the letter leaked to the media shortly after receipt by the company, and hence got much more media attention that it might otherwise have received.

We couldn’t shake the strange feeling that we had seen this one before too. It took some digging in the archives, but we were right. In April 1996, Pfizer got a letter from FDA citing the company for failure to submit adverse event reports to the agency in a timely fashion. Not only did Pfizer get the letter, but FDA leaked it right away to the AP—the exact same outlet to get the letter this time around.

They say history doesn’t repeat itself, but this is as close as it gets. Different products, but same company, same issue, and same attention getting strategy by the agency, 14 years later.
Okay, so what does that tell us, other than that The Pink Sheet’s archives are an incredible resource, and that FDA’s communication tactics are tried and true?

Well, first off there is some sort of lesson in this for Pfizer. Yes, 14 years is a long time and it is ridiculous to draw any conclusions from that coincidence about some sort of corporate history of sloppiness in adverse event reporting. Heck, the latest letter focuses computerized systems that apparently didn’t work as well as Pfizer hoped; the very idea of computerized adverse event reporting was new in 1996.

But still, it does say something about Pfizer’s failure to learn from experience. After all, FDA used the exact same playbook on this issue that it followed 14 years ago, by coincidence or otherwise. For the same company to be the same target when FDA decided to set an object lesson is at least a little bit embarrassing.

There is a more important implication for everyone else. Today, just like 14 years ago, the point of FDA’s strategy is clear: the agency wants to get everybody’s attention on the issue of adverse event reporting. Picking on Pfizer is one thing, but the purpose of the leak is to make sure other companies review their systems and correct any similar problems. It is much easier to leak one letter than to inspect every pharma company for similar issues.

Here’s a bit more history. At the start of 1999, FDA sent two more Warning Letters, citing Novartis and Berlex for failure to submit timely adverse event reports.

That suggests that most manufacturers got the message when Pfizer was warned, and that FDA was willing to give them a bit of time to adjust. But, in FDA’s eyes at least, not everyone got the message quickly enough.

We’ll see if that piece of history repeats this time around.

Monday, June 14, 2010

Health Care Reform: New Fees are New Factor For Partnerships

When GlaxoSmithKline and Pfizer established the HIV-focused joint venture Viiv in April 2009, it sent a bold statement about the commitment of the new partners to new business models and their commitment to creative business development activities. (See “The GSK/Pfizer HIV Venture: Another Sign of Change?” IN VIVO, April 2009.)

Heck, we liked it so much we nominated it for Deal of the Year.

Now that health care reform has been signed into law, it looks even smarter. Viiv turns out to be a brilliantly timed strategy to blunt some of the impact of the up-front costs of reform for biopharma companies.

Thanks to a new formula for calculating Medicaid rebates and the interaction of that formula on prices paid by State AIDS Drug Assistance Programs that cover HIV therapies, that class of medicine is taking a pretty big hit from reform in 2010. (See “Taking Lumps from Health Care Reform," just published on

The impact was felt most acutely by Gilead Sciences, whose product line is very highly concentrated in HIV therapy. The company estimates the impact in 2010 at $200 million, or about 5.7% of its US pharmaceutical sales in 2009.

That ranks as, proportionally, the biggest reported impact from health care reform from any of the publically traded pharmaceutical companies tracked by The RPM Report.

And, naturally, it drew a lot of interest from investors during Gilead’s first quarter conference call April 21. Investors were particularly concerned about the ramp up in the impact on the company through the year; Gilead said the new Medicaid rebate rules reduced sales by $29 million in the first quarter, suggesting a significantly larger liability in the coming quarters.

The reason, Gilead explained, is that the pricing mechanism for drugs purchased by ADAPs lags behind the Medicaid rebate, so the bulk of the impact comes in the last quarter or two of the year.

And the sheer size of the adjustment surprised investors, given that Gilead already provides substantial price concessions to the ADAPs. “In early parts of the healthcare reform discussion, from a distance, we wondered like a lot of companies whether additional rebates would be applied to the payers where we have discounts already in place that are greater than the current 15% now moving to the 23% that have been mandated,” EVP Commercial Operations Kevin Young explained. “It is quite clear from the legislation that irrespective of the discount that you have in place to these federal players, an additional 8% has to be added and I think that’s the clarity that’s now come in the legislation.”

For Pfizer and GSK, on the other hand, the impact on the new Medicaid rebate on antivirals was close to a non-issue. Viiv is about half as large as Gilead in the HIV market, and so might be expected to face an impact of approximately $100 million from reform.

But for Pfizer, which only records income from the joint venture, the impact didn’t merit a mention. GSK records the revenue, but could describe it almost offhandedly in the context of an overall discussion of the manageable size of the reform. CEO Andrew Witty noted in response to a question on the relative exposure of the company to Medicaid and Medicare that “Viiv is a little more exposed than the average.”

Still, the new company did post a sales decline of 7% for the quarter—a result that might have been expected to prompt some comment if it were a $2 billion-plus brand reported by GSK, rather than an innovative HIV therapy joint venture.

That is a nice early return from the joint venture, but it does underscore the likelihood that features of health care reform will start to have an impact on business development.

Take, for instance, Bristol-Myers Squibb’s discussion of the importance of its relationship with Sanofi Aventis for Plavix in considering how the company will be affected in 2011, when a new 50% Part D discount program and market share fee take effect.

“Remember that the sales impact would be relatively higher than earnings due to the accounting treatment for Plavix, where we record 100% of sales, but share profits with Sanofi,” CFO Charles Bancroft noted.

For Viiv, that will not be as challenging an issue. Medicare Part D does cover HIV medicines, but the vast majority of AIDS patients in Medicare are dual eligibles who will not receive the donut hole discount. The market share fee is another matter, however; any sales through Medicare or Medicaid (but not the ADAP sales) will count towards the fee. The rules have yet to be determined, but as the partner recording sales, GSK is likely to be the entity that records the impact of the fee as well.

As the rules of the new Part D program and the calculation of the market share fee are fleshed out, business development executives should pay attention. Treatment of those items is likely to be an important consideration in future partnership agreements.

While You Were Drawing

Depending on your perspective, the US either pulled off hard-won draw on Saturday night with the help of a gift from England keeper Rob Green, or lucked into a point they didn't deserve thanks to the Hand of Clod. We prefer to see the States' cup performance as half-full and 1-all a good reflection of the play on the field, and a draw as frankly the best result. (A win might have resulted in bodily harm to this blogger, well behind enemy lines.)

Without ASCO news the weekend seemed much calmer, much more, well, weekendy. While you were listening to the song of the vuvuzelas ...
  • Bayer reports disappointing results for Nexavar in advanced NSCLC this morning; the drug did not meet the primary endpoint of overall survival.
  • The NYT reports that sequencing the human genome -- at least in terms of advancing treatment of diseases -- has largely been a bust. Not everyone agrees -- quoth Eric Topol (via Twitter): "NY Times Nicholas Wade discounting progress in genomics for about the 10th time."
  • After Gilenia seemingly sailed through its advisory committee last week, lots of ink spilled on what potential approval means for the current market. Yesterday, Haaretz reported on the risks to Teva's Copaxone franchise. Our own position (from an IN VIVO feature last year) is a little more nuanced but we'll sum it up: don't discount the years of safety data amassed by biologics; market share will surely shift, but not suddenly.
  • Note to Phillies. Spotting teams 10-run leads isn't working. Time for new tactics.
  • UPDATE: Human Genome Sciences said this morning that preliminary feedback from FDA on its Zalbin (albuferon) BLA isn't good, from a risk-benefit perspective, and that "HGS has concluded that licensure of this dosing regimen [900-mcg every two weeks] is unlikely." The drug's European application was pulled from the EMA in April 2010 by HGS partner Novartis.

Friday, June 11, 2010

Deals of the Week Screams ¡GOOOOOOOOOLLLLLLL!

In honor of the 2010 FIFA World Cup, IN VIVO Blog is channelling its inner Andres Cantor. Come on, there’s a little bit of the Argentinian-born sportscaster in all of us. Perhaps you did your best Cantor this morning when South Africa's Siphiwe Tshabalala found the upper right near corner of the net for the tournament's first score. Alas, host South Africa later surrendered an equalizer to Mexico, and the opening match Friday ended in a 1-1 draw.

It wasn't the only tussle this week that ended without a clear winner. Henri Termeer, CEO of Genzyme, and activist shareholder Carl Icahn have been kicking the ball up and down the pitch for months, and the compromise between the two gentlemen announced Wednesday was definitely your humble blogger’s favorite deal of the week, even if it doesn’t count as a traditional tie-up.

In finding a middle path, both parties gave up something. Icahn has to make do with just two Genzyme board seats, and his right-hand man Alex Denner isn’t one of them. Termeer, meanwhile, must satisfy the demands of Icahn’s representatives if he wants to avoid the fate of Jim Mullen, who just stepped down as CEO of Cambridge, Mass. neighbor Biogen Idec.

But both Icahn and Termeer/Genzyme also gained significantly. Termeer, for now, keeps his job and avoids the circus of a proxy fight. With some representation on the board, Icahn can still fight for more seats in the future if he chooses. As Charles Elson, a professor at University of Delaware's Weinberg Center for Corporate Governance, told our sister publication “The Pink Sheet” DAILY, “Whether it’s four [seats] or one, the fact that you have someone express your viewpoint…is [what’s] important.” The upshot: if that viewpoint is convincing enough, other board members will eventually come around.

In addition, both Icahn and Termeer avoided spending the weekend on the phone trying to sway major shareholders to their cause, when all parties involved would no doubt prefer to watch the beautiful game -- including Saturday’s not-to-be-missed England-U.S. tilt.

One set of winners to emerge from the boardroom draw were Genzyme shareholders, according to Bernstein Research analyst Geoffrey Porges. In a June 9 note, he called the solution “logical” because it introduces Icahn’s influence into the company without the conflict posed by overlap with Biogen’s board representation.

Who else scored a gooooooooooooooooal this week? Maybe Alzheimer’s patients and their loved ones. Five major drug makers -- Johnson & Johnson, GlaxoSmithKline, AstraZeneca PLC, Sanofi-Aventis, and Abbott Laboratories -- have joined forces to share data from 11 failed Alzheimer’s-drug clinical trials. (Data will also be available to outsiders who have valid scientific questions.) Under the auspices of the Critical Path Initiative, it’s the latest evolution in private-public partnerships, and it’s hoped that sifting through massive loads of patient data, researchers will glean new insights into this tricky disease. It's also notable for who’s not participating, at least not yet: Pfizer, which suffered an embarrassing setback earlier this year when its collaboration with Medivation for the Phase III Dimebon blew up.

Meanwhile, rumors are swirling that FDA suppressed negative data associated with the controversial diabetes medicine Avandia. That should add even more drama to the upcoming advisory committee review (or as we dubbed it last week, a "re-review") of the ramifications of allowing long-term safety studies of the medicine to commence.

In other news of pharma potentially behaving badly, it seems more likely that subpoenas will fly as Congress aims to get to the bottom of the recent recall of Johnson & Johnson’s children’s Tylenol. According to a Friday NYT story, Democratic Representative Edolphus Towns, chair of the House Committee on Oversight and Government Reform, says the health care giant has used delaying tactics and hasn’t been forthright with his committee. Even as J&J denies these accusations, a key goooooooooooooal for the drug maker has got to be burnishing its public image.

Whether you tune into the ballet of the masses or opt for the opera of the people, remember this essential piece of soccer wisdom: “Soccer is simple, but it is difficult to play simple.” The same could be said for biopharma deal making. Game on.

Grifols/Talecris: Hoping a merger with a smaller company might pass muster with the US Federal Trade Commission, Talecris Biotherapeutics is trying the business combination route again, about a year after its planned merger with Australia’s CSL was shot down by the FTC. (In FIFA terms, call it round 2, Spain vs. U.S.) In a deal announced June 7, Spanish firm Grifols SA, the number four company worldwide in the plasma protein therapeutics space, plans to buy Talecris, the number three player, for $3.4 billion in cash and stock, while also assuming the U.S. co’s hefty $600 million debt. In essence, the merger provides Grifols an increased North American commercial presence, while Talecris aims to accomplish two primary goals: an exit for remaining venture backer Cerberus Capital Management and improved capacity and efficiency in plasma collection. Formed in 2005 when Bayer spun out its plasma business to Cerberus and Ampersand Ventures, Talecris went public last fall. Cerberus, however, remained a 49% stakeholder in the public company. Even though the tie-up reduces the number of plasma protein players from five to four, Grifols and Talecris believe this deal has a better shot with the FTC than the CSL/Talecris marriage, because it won’t create a duopoly controlling 80% of the plasma protein market. Instead the top three players -- Bayer Baxter, CSL, and Grifols/Talecris -- will have a roughly equal share of the market. -- Joseph Haas

Sanofi-Pasteur/Vivalis: This week’s announcement from Vivalis that it was teaming up with Sanofi to discover and develop monoclonal antibodies against several infectious-disease targets marks the fourth time the two companies have teamed up. Apparently they like each other’s company. In this latest pact, Vivalis will receive €3 million upfront plus up to €35 million in milestones, plus royalties per program for access to its Humalex Mab platform and worldwide rights on resulting antibodies. Previously Vivalis has in three separate deals granted to S-P (twice) and Acambis (now part of S-P) access to its various embryonic stem cell lines for vaccine and antibody production. This week’s deal is based on newer technology that Vivalis itself acquired only this year. Humalex came into the biotech through its January 2010 €10.4 million acquisition of compatriot Humalys SAS, a move designed to broaden its product offering and potential biz-dev opportunities. Humalys shareholders are eligible for up to €15 million in milestone payments based on pharmaceutical partnerships for the Humalex technology. So far, so good. -- Chris Morrison

Forest/TransTech Pharma: Forest Laboratories isn't giving up on Type 2 diabetes. Just two months after scrapping an expensive deal with Phenomix for the late-stage dipeptidyl-peptidase-4 inhibitor dutogliptin, Forest is jumping back in. The specialty pharma has, however, learned its lesson: while it’s spending pretty big money -- $50 million up front and potentially more than $1 billion in milestones -- for a suite of Phase I and preclinical compounds, at least they belong to a novel class of medicines. The deal centers around TransTech’s highly selective glucokinase activators, which target an enzyme found in the liver and pancreas involved in glucose sensing. Transtech’s ability to specifically regulate the liver glucokinase enzyme was apparently key to the deal. When the pancreatic enzyme is targeted, it results in excessive insulin secretion, which can result in potentially life-threatening hypoglycemia. But the Forest/Transtech team certainly doesn’t have this target class to themselves. AstraZeneca, Amgen, and Eli Lilly also have GKAs in the clinic. This week’s announcement shows early stage deal-making for potentially first-in-class molecules still has legs--and the terms are on par with Amgen’s December alliance with Array for its Phase I GKA, ARRY-403. Even as analysts lauded the deal for its long term potential, the arrangement does little to help Forest replenish a portfolio that’s facing patent pressure. Forest’s two biggest products, Lexapro and Namenda, go generic in 2012 and 2015, respectively. -- Jessica Merrill

GlaxoSmithKline/Laboratorios Phoenix: Will the sun never set on the Glaxovian Empire? GSK's latest international foray has the US/UK behemoth spending $253 million cash for Laboratorios Phoenix, an Argentinian branded-generics firm with about £70 million (US $101 million) in annual sales last year, making it the eighth largest drug seller in the country according to IMS. GSK will add products in areas that include cardiovascular, gastroenterology and urology, plus a primary sales force and a manufacturing plant near Buenos Aires. GSK already has an Argentinian division with 2009 sales of £100 million, £56 million of which came from pharmaceuticals, but it said it would keep the entity legally separate from Phoenix. Dust off your atlases and grab your Rick Steves packing cubes, here's a list of GSK's regional deals since the start of 2009. Last month it bought a nearly 10% stake in South Korea's Dong-A Pharmaceutical and in December it snapped up 12.6% of Japan's JCR Pharmaceuticals, after also creating joint ventures with two different Chinese biotechs, Jinagsu Walvax Biotech and Shenzhen Neptunus Interlong Bio-Technique. Don’t forget its purchases of UCB's emerging markets business for €515 million (US $621 million) and Bristol-Myers Squibb's branded-generics operations in Lebanon, Syria, Yemen, Jordan and Libya for $23 million. Piled onto all this pharmerging goodness is Glaxo’s deal to sell Dr. Reddy's products in several regions and its 19% stake in South African generics firm Aspen Pharmacare. At risk of making light of pharmaceutical colonialism, we point out that GSK is one of several massive drug makers playing a "Great Game" of international acquisition. Our colleague Wendy Diller renewed her passport to sort out the emerging-market land grab in this IN VIVO feature. -- Alex Lash

Photo courtesy of flickr user CLF.

Editor's note: This post was updated on June 14th to indicate the top three players in the plasma protein market: Baxter, CSL, and Talecris/Grifols. Bayer was inappropriately mentioned as part of an editing error.

Thursday, June 10, 2010

And Now, It's Time for a Rap About Stem Cells

h/t Gilman.

Wednesday, June 09, 2010

Guest Post: The Next Feeding Frenzy? VCs Rush Toward Diagnostics (!?)

Steve Dickman is the CEO of CBT Advisors. He blogs about biotech, VC and personalized medicine at Boston Biotech Watch. Interested in guest blogging for In Vivo? Drop us a line here.

There was a time not long ago when no amount of persuasion could have made most venture capitalists do a diagnostics deal. The reasons abounded: markets were too limited; margins were too low; and the number of potential acquirers too small. So imagine our surprise when the most upbeat session of this year’s c21 investor conference in late May was a panel discussion focused on – you guessed it – molecular diagnostics.

If this is not a feeding frenzy, then at least it seems to be a period of high marketability for private diagnostics companies seeking acquisition exits. Session chair Bill Kreidel of Ferghana Partners described four sell side diagnostics assignments his firm is working on for which multiple bidders had appeared.

What sells? Proprietary content, improvements in speed or sensitivity/specificity, robust datasets, and large markets. Who are the buyers? Clinical labs like Labcorp, naturally, but also instrumentation companies in the imaging business like General Electric that “see diagnostics cannibalizing some of their revenue” and are trying to capture it back, said panelist Dion Madsen of Physic Ventures.

The advent of acquirers such as GE has caused venture firms to change their tune. The three venture capitalists on the panel certainly weren’t diagnostic neophytes. Madsen, Dr. Rowan Chapman of Mohr Davidow Ventures, and Dr. William Gerber of Bay City Capital have all made numerous investments in diagnostics and personalized medicine including Tethys Bioscience and CardioDX, clinical lab companies that recently reached commercial status.

And there have been some impressive diagnostic exits driving venture interest. Switzerland-based HBM Partners, for instance, announced last September that it had earned a 21.6x multiple on its investment in Brahms, a Berlin-based diagnostics company acquired by Thermo Fisher.

But the information asymmetry that led to that deal has begun to recede now that investors have woken up to the opportunity. Still, in today’s market, where the environment is driven by cost constraints rather than spending, the locus of value is shifting earlier, toward diagnosis and away from treatment. In other words, knowing in which patients a therapy will work is as important as knowing whether it will work at all.

One common approach is for a company to walk into a VC firm and say “We are the next Genomic Health”, a Nasdaq-listed company (ticker GHDX) with OncotypeDX, a commercial breast cancer test, as if that were an appropriate role model. But Genomic Health, its stock down 25% in the last quarter, is not only not a role model, it’s a bad example, Madsen said.

“We still get companies saying they will be the next Genomic Health and we say, we don’t WANT you to be that!” emphasized Madsen. Gerber, whose fund did not invest in that biotech, added “Their first study was published in ’04 and it’s six years later and they are just about to break even!”

Circumstances have drastically changed both for IPO exits and for reimbursement in the interim. At the moment, an IPO is an unlikely dream for companies that do not have tens of millions of dollars in revenue. And reimbursement is complicated by both the murky regulatory situation and the unlikely circumstances that allowed the company to get reimbursed at unprecedented levels. “Breakeven [for Genomic Health] is predicated on a $3,000 price point,” Kreidel observed, “not something most diagnostics companies can aspire to”--except, we would argue, in oncology.

Adding to the complexity is a lack of clarity on the regulatory front. At the rate the Food and Drug Administration is moving it will be 2011 before companies offering algorithm-based tests like OncotypeDX have a clear path forward. (When will the regulations arrive? “There are as many answers to that question as there are consultants in Washington,” quipped the fourth panelist, Bruce Cohen, CEO of VitaPath Genetics.)

So VC-backed companies are working on building proprietary content strong enough to stand up to any level of regulatory scrutiny. What does content mean? (See here for a blog post explaining Madsen’s views on the subject and his criteria for what makes a “doable deal” in diagnostics.) Put simply, “content” is the unique ability to make a diagnosis or link a drug to efficacy in a particular patient in a reproducible way.

Three quick examples of the content-driven, data-intensive approach:

  • VitaPath Genetics, a Mohr Davidow portfolio company developing a cheek-swab test for spina bifida risk early in prior to pregnancy. It ran a 2,100-subject study to validate its test and hopes to go commercial by 2011 on a modest $15 million.

  • On-Q-Ity, a Boston-area company invested in by both Physic and Mohr Davidow is another example. To develop a commercial test to inform physicians when to treat cancer aggressively or even which chemotherapeutic agents to deploy, On-Q-Ity will require an “intensive analysis of tumor samples” and a “huge bioinformatics exercise,” he said.

  • A third company, mentioned but left unnamed by Kreidel, has apparently achieved a remarkable level of sensitivity and specificity in predicting ovarian cancer, an area of huge unmet need where a better test would help thousands of women avoid surgery – and help insurers avoid paying for it.
So the new VC recipe goes like this: Find a potential market for which reimbursement is uncertain. Define a plan based on capturing reliable data from the vagaries of human biology. Invest VC dollars to collect the data. Crunch the numbers. Then see what you’ve got.

Hmmm. The risk profile sounds almost like …drum roll, please… therapeutics investing.

But it’s actually better – fewer dollars in, earlier clinical signals. And now, more likely exits with no need for an IPO. No wonder there are more investors than ever in this space. Some of them are likely to go home winners.– Steve Dickman

image from flickr user chamer80 used under a creative commons license