Friday, January 21, 2011

Deals of the Week's Musings On Avastin And Payer Pushback in Oncology

The J.P. Morgan adrenaline has worn off and the exchange of business cards has yet to yield splashy deal news: no headline M&A, no landscape-altering partnerships. But the biggest tie-ups of the week, authored by inVentiv Health (see below), are nonetheless significant and an early sign of what we think could be a big trend in 2011: the evolution of service providers into one-stop shops for drug makers looking to shed costs via outsourcing.

Ahead of next week's State of the Onion, the other big industry news was regulatory and commercial. Roche and Genentech fired an opening salvo(also called a NOOH) in what could be a protracted battle to retain the breast-cancer indication for their monoclonal juggernaut Avastin. In a 98-page document that seeks a hearing on FDA’s proposal to withdraw Avastin’s accelerated approval in metastatic breast cancer, the company makes a sweeping attack on the agency’s regulatory treatment of the medicine but offers concessions in the form of a new study, a Risk Evaluation and Mitigation Strategy and a continued suspension of marketing. Those efforts, says Genentech, justify keeping the indication available for the time being. (You can check out our full treatment of the brouhaha in the Monday, January 26 edition of sister pub "The Pink Sheet". )

There's even a bit of fear-mongering: Genentech warns that revoking Avastin's metastatic breast cancer indication is tantamount to setting a new approval standard, a move that could deter drug development.

Maybe, but even as Genentech faces off against FDA, the vital question, even if the breast cancer indication is maintained, is how payers will react The industry's overwhelming perspective is that cancer is "different," a protected therapeutic class that allows wide latitude for physicians to choose the regimen, dose, and duration of treatment for patients. But we've seen early signs of payer pushback, with insurers finding new ways to control costs through a soft formulary approach, still experimental, that standardizes treatment for a particular disease or tumor type and gives physicians fewer choices.

As Bernstein Research's Geoffrey Porges noted in an analyst report this week, these programs "have had impressive results with up to 40% reductions in the cancer treatment drug spend in the practices and diseases where they have been implemented, without appreciable negative effects on disease outcomes."

In other words, if you thought bundling would be limited to chronic kidney disease, you haven't been paying attention.

A provocative statement? Undoubtedly. Are we full of hot air? Maaaay-bee. Feel free to weigh in on whether oncology is still a protected class and, if not, the potential impact to the industry. Rest assured we are following the topic closely, even as we round up another edition of....

Ironwood/Protagonist: Ironwood Pharmaceuticals said this week it would license disulfide-rich peptide discovery technology from Protagonist Therapeutics to investigate new drug compounds. Financial terms weren’t disclosed, but Ironwood will make an upfront payment and fund Protagonist’s discovery activities during the lifespan of the partnership. Ironwood will also owe unspecified milestone payments and royalties on products created using Protagonist’s technologies. An Australian university spin-out now based in Redwood City, Calif., Protagonist’s injectable and oral DRPs have the added bonus of reaching targets heretofore poorly addressed by both small molecules and monoclonal antibodies, including interleukin-6 antagonists and novel gastrointestinal targets. The allure of such compounds is strong; these molecules by definition check the unmet medical need box, making them attractive to Big Pharma partners and, by extension, VCs. (For more on the industry's desire to harvest high hanging fruit, see this START-UP story.) Protagonist is backed by Lilly Ventures and a syndicate of Australian firms including Starfish Ventures, QBF, TeQstart and Start-up Australia. Ironwood, a DOTY nominee, is developing drugs for chronic diseases, even as its dual class share structure permits long-term independence. -- Paul Bonanos

Merck Serono/Domain Therapeutics: Merck Serono, a unit of Merck KGaA, has inked a deal with France’s Domain Therapeutics to develop treatments for Parkinson’s disease and other neurodegenerative diseases. It's worth €2 million upfront plus research funding. The early stage collaboration gives Merck Serono access to Domain compounds developed with the biotech's proprietary chemistry. In return, Domain is also eligible for €132 million ($175 million) in milestones for the first two products developed under the collaboration, as well as undisclosed royalties. Domain will use its platform technology to develop metabotropic glutamate receptor 4 (mGluR4) Positive Allosteric Modulator (PAM) drugs. In a press release, Domain execs called the deal validating and believe it "will enable us to sign further deals of this kind.” The collaboration with Domain follows the failure of Merck’s Phase III Parkinson’s drug safinamide to meet endpoints for the treatment of involuntary movements associated with the disease (and negative news in Europe on MS oral drug cladribine). -- Lisa LaMotta

Pfizer/Theraclone: Pfizer signed its third deal in as many months in the antibody discovery space, this week partnering with Theraclone Sciences. (Other tie-ups include the Ablexis consortium and access to Seattle Genetics' ADC technology.) Under the Theraclone deal, Pfizer gains access to the biotech's I-STAR antibody discovery technology, which allows for broad and rapid testing of antibodies made from human B cells, versus antibodies that have been artificially generated in vitro. Pfizer will use the I-STAR technology to discover monoclonal antibodies against up to four undisclosed targets, two in infectious disease and two in cancer. Theraclone stands to receive up to $632 million under the alliance, though how much money will come near-term is unclear. The companies did not break out when the bulk of the payments will be made. Pfizer is responsible for preclinical and clinical development of the candidates. For Theraclone, a privately-held start-up formed in 2005 that has raised $35.5 million since inception, the deal is important as it marks the biotech's first alliance with a big pharma partner.
Pfizer's Senior VP of worldwide biotherapeutics R&D Jose-Carlos GutiƩrrez-Ramos told IN VIVO Blog that the drug giant isn't done doing deals in the antibody discovery space. -- Jessica Merrill

inVentiv Health/Campbell Alliance & inVentiv/i3: Big changes are underway at inVentiv Health, an outsourcing outfit specializing in launch and commercialization services. This weeks comes news that it is acquiring two businesses: the clinical outsource firm i3 (from Ingenix) for $400 million and the privately-held consulting firm Campbell Alliance for an undisclosed sum. The moves show how service providers hope to reshape themselves into end-to-end solutions providers to better meet the needs of clients that are slashing R&D costs but no longer want to outsource in a piecemeal fashion. Indeed, bigger fish like Covance and Quintiles are already moving in this direction. Quintiles, for instance, recently announced Vince Aurentz, formerly EVP of Portfolio Development at Merck Serono, as the EVP of its customer solutions business. When IN VIVO Blog caught up with Aurentz at the J.P. Morgan confab, he emphasized his new role is to align the CRO with customers' needs, whether they are consulting, commercial, clinical, or of a capital nature. With purchases of specialists like Campbell and i3, inVentiv is borrowing a page from the Quintiles playbook, though how it integrates the disparate services remains to be seen. Campbell Alliance, for instance, will continue to operate as an independent division. The buyout of Campbell provides an exit for private equity firm Baird Capital, which invested $23.5 million three years ago to fuel the North Carolina consultancy's ambitions to boost annual revenues to $150 million by 2011. -- EFL

Johnson & Johnson/Sanford Burham Institute: Behold the power of academia and not-for-profits. As Pharmas try to identify new wellsprings of innovation, public-private alliances -- a trend we tracked closely in 2010 -- show no signs of tapering off. Hard on the heels of UCSF's myriad deals comes news that Sanford Burnham Institute is teaming up with J&J's Ortho-McNeil-Janssen division to tackle the big hairy problems (aka BHPs) of Alzheimer's disease and major psychiatric disorders. This is Sanford's second major tie-up in recent weeks; it aligned with Takeda in late December to identify new obesity therapies. As part of the latest deal, Ortho-McNeil pays undisclosed upfront and yearly access fees rumored to be bigger on a per-annum basis than what Pfizer plunked down in its UCSF collaboration. There are also the requisite milestone and royalty payments for successfully developed products. In return, the J&J group gets exclusive access to Sanford Burnham's scientists in the areas of neurologic and psychiatric disorders for three years. This isn't the first time J&J, which is trying to reshape its pharma R&D pipeline via open innovation, has turned either to Sanford Burnham, or more broadly, non-profits, for help. Back in 2009 the company's San Diego R&D group teamed up with the non-profit, which is conveniently located on the same cul-de-sac, in an assay development and license agreement aimed at identifying new targets for inflammatory diseases. J&J also has a collaboration with Vanderbilt U.'s Drug Discovery group to develop new schizophrenia targets in the mGluR5 neurotransmitter pathway. A shared mindset is critical to making partnerships like the Burnham/J&J alliance work; the fact that the institute's VP of Drug Discovery Michael Jackson hails from J&J should help. Paul Laikind, the institute's chief business officer, also has industry expertise as former CEO of Metabasis. He predicts the institute has the capacity to do three or four thematic collaborations. Seeing how the non-profit has a site devoted to pediatric research, and regulators increasingly want to see additional studies in children, an industry partnership in this arena seems like a near-term possibility. -- EFL

Image courtesy of flickrer circulating, used with permission through a creative commons license.

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