As 2010’s days grow shorter, the pharmaceutical industry’s larger players face fundamental challenges, both in how they invest in internal research and how they ensure continued growth commercially for their medicines in the face of increasing scrutiny from regulators and payers. An analysis of Elsevier’s Strategic Transactions database in the October IN VIVO shows that, to date, most companies have adapted with a three-pronged strategy that places an emphasis on externalization, emerging markets, and unmet medical need.
This week’s edition of deals of the week doesn’t stray far from these established themes. (Poison ivy was apparently considered optional.)
Sanofi-Aventis’s alliance with Harvard University illustrates the ongoing allure of academic relationships, as drugmakers look to identify innovative new medicines ever earlier in the development cycle. Meantime, Glaxo’s tie-up with two Italian foundations in the development of a gene therapy to treat a disorder affecting only a few hundred people worldwide shows that no disease is too rare to attract Big Pharma’s interest--as long as the unmet medical need is high. Finally Pfizer’s deal with Indian biotech Biocon, illustrates drugmakers’ growing interest in both diabetes AND emerging markets.
GlaxoSmithKline/Fondazione Telethon & Fondazione San Raffaele: Big Pharma’s interest in rare diseases shows no signs of waning. This week’s rare disease pact – it seems like one a week is now pro forma for DOTW – aligns GlaxoSmithKline and two Italian foundations. On October 18, GSK announced plants to pay Fondazione Telethon and Fondazione San Raffaele €10 million upfront (about $14 million) for worldwide rights to a Phase I/II stem cell-based gene therapy for ADA-SCID, also known as "bubble boy disease." ADA-SCID, a single-gene defect which prevents the body from producing the enzyme adenosine deaminase, afflicts about 350 children worldwide, with about 14 EU patients and 12 U.S. patients born each year. (Thus, this isn’t simply GSK investing in a rare disease; ADA-SCID counts as one of those “ultra” orphan indications, a valid term even if it makes industry and advocacy groups squeamish.) Beyond the ADA-SCID program, the two foundations will partner with GSK on clinical programs in Wiskott-Aldrich Syndrome and metachromatic leukodystrophy, as well as four additional programs, all currently in preclinical development. In addition to the upfront payment, the foundations could earn specified development milestone payments for each program. In a same day business presentation, GSK’s Global Head of Rare Diseases Marc Dunoyer offered additional color about the rare disease unit’s strategic intent. The pharma intends to address 200 rare diseases with a focus in four primary areas: metabolism and inherited disorders, central nervous system and muscle disorders, immuno-inflammation, and rare malignancies and hematology. It continues to build its portfolio via dealmaking, including ongoing collaborations with Isis, Prosensa, and JCR Pharmaceuticals.—Joe Haas
Genentech/Biogen Idec: The longtime Rituxan partners have amended their co-development terms for next-generation anti-CD20 compounds. Biogen now gets slightly higher royalties on sales of the still-experimental compounds ocrelizumab and GA101, and their introduction will not trigger lower Rituxan royalties, as was previously outlined in their agreement. The firms squabbled for years over rights to what comes after Rituxan, and an arbiter ruled last year that Biogen had the right to participate in all anti-CD20 program development decisions. Historically Biogen has received 30% of the first $50 million in US and Canadian operating profits, then 40% of everything over $50 million, a threshold passed by Rituxan in the first quarter in each of the last three years, according to ISI Research analyst Mark Schoenebaum. Commercialization of ocrelizumab will no longer reduce Biogen's share of Rituxan profits, but certain regulatory and sales milestones of GA101 will. Also, Genentech will pay for all ocrelizumab development in multiple sclerosis, with Biogen receiving between 13.5% and 24% of US sales. With GA101, which in 2008 Genentech licensed from Glycart -- itself wholly owned by Roche -- Biogen will now pay 35% instead of 30% of US development costs and receive between 35% and 39% of profits based on certain sales milestones. GA101 is in advanced development for CLL and NHL. Ocrelizumab is in Phase II for multiple sclerosis but is no longer being tested in rheumatois arthritis. -- Alex Lash
Pfizer/Biocon: Pfizer and India's biotechnology flag-bearer Biocon finally -- after months of speculation -- announced a comprehensive global commercialization pact to bring to market a range of insulins including analogs of medicines marketed by Sanofi-Aventis, Novo Nordisk and Eli Lilly. Pfizer is doling out $200 million in upfront payments to Biocon, with the Indian biotech eligible for further milestone payments of up to $150 million. Biocon will also be entitled to additional payments linked to Pfizer's sales of its four insulin biosimilar products across global markets. As part of the deal, Biocon will take up clinical development, manufacture and supply of the biosimilar insulin products and regulatory activities needed for approvals in various geographies. Pfizer has told analysts that the deal will be "incremental," not "instrumental" to its strategy in emerging markets, biosimilars, and established products. Pfizer will be responsible for commercializing the products, while Biocon will develop and manufacture them. "Pfizer's participation in this market does raise the bar for the major producers of insulin over the long term," Leerink analyst Seamus Fernandez wrote in a same-day note. But it won't have a near-term impact because Pfizer brings little to the table beyond marketing muscle and the biggest opportunity lies in developed markets, where some of the products are patent protected for several more years. Sanofi's Lantus, for example, doesn’t lose exclusivity until 2015. – Vikas Dandekar
Romark/Intercell: Romark Laboratories and Intercell said they will collaborate on their hepatitis C programs by conducting trials on a combination therapy that will include Romark’s anti-viral drug nitazoxanide and Intercell’s HCV vaccine, IC41. The combination will seek to improve on the standard of care by adding IC41’s immune-boosting properties to nitazoxanide’s ability to slow cell replication without inducing mutations. The drug pairing will be studied side-by-side with the currently used combination of Pegasys (peginterferon alfa-2a) and Copegus (ribavirin), as well as a three-way combo of nitazoxanide, IC41, and Pegasys in a European Phase II trial slated for the first half of 2011. Nitazoxanide, an anti-infective agent in the drug class known as thiazolides that appears to activate protein kinase R, is already marketed to treat diarrhea caused by viral infections. It has been studied in conjunction with peginterferon and ribavirin as well. Tampa, Fla.-based Romark and Vienna-based Intercell did not announce financial terms of the deal.—Paul Bonanos
Sanofi-Aventis/Harvard University: Technically the tie-up between Sanofi and Harvard is a deal of last week, but with so much industry activity--and playoff mania--IVB somehow overlooked a deal that ought to be seen as a sign of the times. On October 14, Sanofi and Harvard announced they were joining forces in a broad translational alliance that gives the French pharma an early look at cutting edge science that could be important future pipeline substrate. Deal terms were not disclosed, but the collaboration is designed as a grants program, with a joint steering committee from both entities awarding funding based on scientific merit and “the potential to generate translational insight and value to biomedical research.” The boon for Harvard: scientists get access to flexible and rapidly available funding without spending hours – it’s really more like weeks or months – writing up government grants. Sanofi, in turn, has the opportunity to develop diagnostic, therapeutic, and prognostic applications of any discoveries made under the collaboration. Partnerships with academia have shown a marked uptick in number in 2009 and 2010 compared to years prior. According to Elsevier’s Strategic Transactions, the number of industry-academia partnerships jumped from 6 in 2007 to well over a dozen thus far in 2010. Nor are these the typical outsourcing relationships of yore; most are structured as true partnerships that aim to share both risk and reward. Notable recent examples: AstraZeneca’s alliances with University College London and Cancer Research Technology to create stem cell therapies for ophthalmic diseases and novel cancer medicines, respectively.--EFL
GE/Clarient: With cancer diagnosis and characterization in the vanguard of molecular diagnostics development and investment, it’s no surprise that GE Healthcare chose the area for its first major external investment in molecular test content. On Friday it announced an approximately $580 million tender offer for Clarient, which provides laboratory tests using important clinically validated cancer molecular markers including BRAF, EGFr, and KRAS. The deal, at $5 per share, is roughly a 25 % premium over its closing price yesterday of $3.77. Clarient hit profitability earlier this year, taking in $28.7 million for its testing services in the second quarter ending June 30. It utilizes most of the standard cancer testing technologies including immunohistochemistry, flow cytometry, FISH, and imaging. GE, working through its subsidiary in the UK (the former Amersham, which it acquired in 2003), expects to combine Clarient’s chemistry and molecular platforms with its own diagnostic imaging expertise, which would give it a full suite of triage and cancer diagnostic capabilities. In a sense, the link to imaging brings Clarient full circle. It originated as ChromaVision, a developer of digital microscopes, then morphed from an equipment maker into a service provider. Safeguard Scientifics, a 26% owner of Clarient going back to its ChromaVision days, said it will net approximately $145 million in the deal.-- Mark Ratner
St. Jude Medical/AGA Medical: St. Jude Medical’s announcement on Monday that it would pay $1.3 billion ($20.80 per share, a 43% premium) for AGA Medical, which had sales in 2009 of just $199 million, likely caused jaws around the industry to drop. Pick your chins off the floor, people. The transaction makes sound strategic sense, driving growth in key areas where St. Jude has significant resources but slower growing products. Case in point: St. Jude’s atrial fibrillation business grew by only single digits in the past year in the US, and the cardiac rhythm management sector is forecast to grow on a global basis by only 3% in the coming year. In contrast, AGA, operating in structural heart disease--a product segment that includes heart valves and various closure devices--enjoys double digit growth thanks to its leading share of the $250 million market for PFO closure. AGA also offers a number of new product areas to drive growth for St. Jude, including a next-generation vascular plug technology to replace embolic coils and a proprietary mesh-braided nitinol platform that will enhance the big device maker's product pipeline. In the company’s recent third quarter conference call, St. Jude Chairman and CEO Daniel Starks described the acquisition as a bolt-on to its cardiovascular franchise; the company is keeping on AGA president and CEO John Barr as head of the 550-person division. St. Jude’s recent deal flow indicates the company is trying to enter new markets via the business development suite. In September, the cardiovascular giant invested $60 million in remote monitoring company CardioMEMS, developing an implantable sensor for AAA and congestive heart failure monitoring. Early this year St. Jude also acquired intravascular imaging company Light Lab Imaging Inc. for $90 million.--Mary Stuart
Image courtesy of flickrer Neil Boyd used with permission via a creative commons license.
Friday, October 22, 2010
DotW Strategies
Friday, October 03, 2008
DotW: Angst
The mood of the nation is undeniably dark. The turmoil on Wall Street is enough to give even the most steady individual palpitations. And the antics on the Hill--don't get us started. Even Silicon Valley, that bastion of wealth and exorbitantly priced homes, looks to be in jeopardy according to today's New York Times.
Despite the counter-cyclical nature of the biopharma industry and its relative immunity to the widening credit crunch, skies in biopharma land are also far from rosy. Roche still hasn't managed to close the deal with Genentech, but according to the WSJ, remains steadfast that it has the capital it needs to get it done. So what if the two companies haven't agreed on a price? (It's worth noting that if negotiations drag on much longer, the Swiss pharma's original offer of $89-a-share may start to look better and better given the roiling market and the news that Raptiva use has now been linked to at least one case of PML. Hmm. Maybe patience is a virtue.)
Moreover, discussion of biopharma's lack of R&D productivity has been replaced by talk of an "innovation crisis" in certain circles. A small but intrepid group of readers weighed in with their own thoughts: 63% agree their isn't enough innovation to sustain the industry, while 37% remain more optimistic. (Note there's still time to have your say if you haven't already.)
We aren't sure if the folks at Pfizer and Merck see the innovation glass as half-empty or half-full, but we're guessing the former based on this week's news flow. Forced to take a hard look at their pipelines, both Merck and Pfizer responded this week by terminating R&D programs that were suddenly too expensive to justify. In the case of Merck, it was their troubled Phase III obesity drug, taranabant, a close cousin of Sanofi-Aventis’ rimonabant (Acomplia/Zimulti). Pfizer announced an even bigger retrenchment, forsaking early stage R&D in heart disease, obesity, bone health, and other areas, an amazing turn-around for a company's who bread-and-butter has been primary care blockbusters such as Norvasc and Lipitor.
And then there's the news that Lilly is ImClone's mysterious suitor, but not quite ready for its big reveal. In a statement released Wednesday night, Carl Icahn announced that “the large Pharma company has completed due diligence and made a proposal not subject to financing or further due diligence," but has asked ImClone to stay mum about its identity until the negotiations are finished. Oh, Carl you are so coy. It's enough to make a grown person cry.
If your calls for mommy dearest have gone unheard, fear not. We have the antidote for your furrowed brow--and no, it's doesn't call for watching send-ups of Sarah Palin or spiking the water supply with antidepressants. (We're pretty sure that's already been tried.) It's time once again for...
Genentech/GlycArt/Roche: The boards of Roche and Genentech may not be able to agree on a price for Genentech, but that isn't stopping scientists at the two companies from working together. (Isn't it special when family members play nice?) On Friday came the announcement that the South San Francisco biotech was teaming up with Roche's subsidiary to develop GlycArt's GA101 molecule, a humanized, souped-up anti-CD20 antibody currently in early stage clinical trials for various leukemias. As part of the deal, Genentech will record $105 million in R&D expenses as part of its third quarter 2008 results. The three companies will, however, share certain development costs and Genentech will receive US commercialization rights in the US. This is not Genentech's first foray into the development of an anti-CD20 antibody. The company, of course, markets Rituxan, which was developed by scientists at BiogenIdec. But that drug is far from perfect and a certain percentage of patients fail to respond to the antibody. That's allowed next-generation antibody players such as GlycArt, Xencor, BioWa, and GlycoFi (now part of Merck) to develop souped up versions of the molecule using optimization technologies as we discussed here. In fact, this latest announcement may spell trouble for Xencor. Back in 2004, it inked a deal with Genentech to develop a better version of Rituxan using its own protein engineering technologies.
Wyeth/Advanced Life Sciences: It's no secret that public biotechs walk a tight-rope when they sign alliances--the deals give them some necessary cash and validation, but investors don't always like them. How to solve this conundrum? Sign a development pact that's limited to a geographic area of the world. On Wednesday Advanced Life Sciences and Wyeth announced a commercialization pact for ALS's long delayed antibiotic, cethromycin. Wyeth will market the drug, which is related to Sanofi-Aventis's Ketek, in all parts of Asia except Japan, where Abbott Labs has rights to the compound. As part of the deal, Wyeth is purchasing a 4.9% equity stake in ALS and will pay the company milestones and sales royalties based on the future development of the antibiotic. The commercial partnership is a significant step forward for Advanced Life Sciences, which has worked hard to shore up its balance sheet by inking debt and equity financing agreements so that it can remain in business until cethryomycin's approval. Unfortunately concerns that Advanced Life Science's drug may also cause the liver toxicities and patient deaths observed with Ketek use have meant that the antibiotic must complete additional trials before it can be approved in Asia. (Advanced Life Sciences recently submitted the drug to the FDA for approval.)
Ortho-McNeil-Janssen Pharmaceuticals/Advinus: Yet another company goes to South Asia to access cheaper drug discovery and early clinical development expertise. On Tuesday, Advinus, an India-based CRO, and Ortho-McNeil, a division of Johnson & Johnson, announced they were teaming up to develop molecules against a variety of undisclosed disease targets. Historically OMJP's interests have been in pain, infectious disease, and GI disorders, while Advinus has focused on metabolic diseases. Like the previous deal Advinus signed in 2006 with Merck, the agreement with OMPJ gives Advinus responsibility for discovery and clinical work through Phase IIa, at which point the J&J group has the option to advance promising candidate drugs into late stage clinical trials. If it does so, OMPJ picks up responsibility--and the tab--for worldwide commercialization. Deal terms were slightly richer for the CRO this time around, perhaps proof that the company has established itself as one of Asia's service companies of choice. As was the case with the Merck tie-up, Advinus will receive an upfront payment of an undisclosed amount. If it delivers two targets to OMJP, it will receive an additional $247 million plus royalties on sales of any future drug products. (In its deal with Merck, the Indian company gets just $149 million plus royalties on future sales for delivering the same number of targets.)
GE Healthcare/MicroCal: General Electric, GE HealthCare's parent company, continues to get beaten in the market, announcing Wednesday that it would gladly accept $3 billion from Warren Buffett (So would we!). But the financial upheaval didn't stop the med-tech group from acquiring the privately-held instrument maker MicroCal for an undisclosed sum. MicroCal's proprietary platform dovetails nicely with GE Healthcare's existing BiaCore platform, providing scientists with detailed information on the structure, function, and binding properties of biomolecules like proteins and antibodies. The move shows that GE Healthcare continues to eye the competitive tools space, and should give pause to companies like Perkin Elmer and Thermo Fisher. Indeed, the conglomerate has inked four other deals this year alone, including the take-out of Whatman PLC, maker of filtration and cell sample preparation technologies, for $702 million and the recent $990 million purchase of respiratory device specialist Vital Signs. Massachusetts-based MicroCal was pretty long in the tooth despite its private status--it was founded in 1977 by John Brandts, a U. Mass. chemistry professor. The private equity group Riverside Partners, which first invested in MicroCal in 1999, was the instrument maker's primary owner.
Covance/WuXi: Just months after unveiling plans to create a JV for preclinical drug testing services in China, WuXi PharmaTech and Covance have scuppered the deal. When the deal was first announced in June, it was heralded as a positive step for both companies: the Covance name appeared to give WuXi added credibility outside Asia, while the collaboration helped the Princeton, NJ-based CRO access the lucrative China market. But the deal wasn't necessarily balanced from the start: WuXi had committed to building the facilty, and for its work Covance was ponying up just $20 million. Though details haven't been fully disclosed, it seems likely that this imbalance coupled with competing priorities at Covance may have derailed the agreement. Recall that Covance recently acquired Eli Lilly's drug development campus in Greenfield Indiana for $50 million. Our sister publication PharmAsia News has the full story.
image from flickr user 'stuck in customs' used under a creative commons license.
Friday, July 25, 2008
DOTW: Short, Sweet, and Not Just Roche
Thanks to some well-timed vacation for a few members of your hard-working blog team here at IVB things might be a little quiet for the next week or so. Not entirely so, but just enough that you'll have a dull ache somewhere in the bottom of your soul. Take an antacid, you'll be fine. Probably.
But what a week it has been, and we're not just talking about the NL East race. Roche has kept us all entertained with its bear-hug of Genentech and--as if to say, hey, its business as usual here in Basel--two further acquisitions: RNAi delivery play Mirus and the antibody screening platform company Arius.
We hope we've entertained you with our coverage here and elsewhere within the broad FDC-Windhover family of fine publications, and we've had a good response to our poll about the wisdom of Roche's $44 billion move: 54% of the nearly 200 responses we've had thus far think that the Roche/Genentech relationship wasn't broke and so Roche is stupid for trying to fix it. If you haven't voted, go ahead, the poll is still open. And don't forget to suggest other ways Roche could spend all that money: we've started a list here.
Of course this week hasn't been all hand-wringing about Roche's moves, other companies have been busy as well. GE bought Vital Signs for $860 million. Summit and Biomarin teamed up to develop Summit's Duchenne muscular dystrophy preclinical candidate. GSK pronounced its tie-up with the South African generics player Aspen a "transformative" deal. Sanofi-Aventis' Sanofi-Pasteur vaccines division today snapped up UK vaccine play Acambis. And Lilly decided to find an alternative way to finance its Alzheimer's pipeline with a deal involving Quintiles' NovaQuest division and the massive investor TPG-Axon (see their earnings release for more details).
We're tired just thinking about all that.
image from flickr user Derek Farr used under a creative commons license.
Friday, February 08, 2008
Deals of the Week: Winter of Our Discontent
Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)
Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.
Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)
If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.
- Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
- Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
- GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
- GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.
"West," by Flickr user Dreamer7112, used under a creative commons license.
Wednesday, August 15, 2007
They MIGHT Be Giants
But can they change health care?
The New York Times reports yesterday that IT titans Microsoft and Google were set upon using their individual might to “improve the nation’s health care.”
Try as we might to be impressed by caliber of these indisputable pioneers, IN VIVO Blog is having a bit of troubling mustering anything more than a “ho hum.” Perhaps, if we try real hard, we might push it to, “We’ll believe it when we see it.”
See, we’ve been hearing (and writing about) about this IT revolution in health care for close to 10 years now. Back then Internet entrepreneurs—albeit with shoddy business plans and puddle-deep knowledge of health care—promised to bring the power of IT and the Internet to bear on the $1.3 trillion dollar health care system. The end result? Now many of those same entrepreneurs are promising to bring the power of IT and the Internet to bear on a $2 trillion-plus health care system.Yep, a 50% increase. How’s the might of IT doing so far?
So what’s different today? Well, to be fair, the Internet model is in a lot better shape than it was 10 years ago. Google, which continues to impress us (have you used the Street View feature on Google Maps? Amazing), wasn’t even around, and no one had quite figured out how to make money off the Internet yet. Today, Google’s model and services serve as a foundation for many of the start-ups in this area today. As for Microsoft, IN VIVO Blog won’t pretend we know much about the company other than we use Windows and Internet Explorer. But there’s little doubt the company hasn’t focused on health care up until now because it had much lower fruit to pick in other industries. Hospitals and doctors are notoriously bad customers for IT companies.
Perhaps that’s why both companies appear to be targeting the consumer… er…the patients. Question is can these companies capture some of the juice for a health-care consumer product? (It’s hard to imagine a ready list of drug allergies garnering the excitement of finding a new sushi restaurant on your iPhone.) Here’s what’s reportedly being planned, according to the Gray Lady:A prototype of Google Health, which the company has shown to health professionals and advisers, makes the consumer focus clear. The welcome page reads, “At Google, we feel patients should be in charge of their health information, and they should be able to grant their health care providers, family members, or whomever they choose, access to this information. Google Health was developed to meet this need.”
A presentation of screen images from the prototype — which two people who received it showed to a reporter — then has 17 other Web pages including a “health profile” for medications, conditions and allergies; a personalized “health guide” for suggested treatments, drug interactions and diet and exercise regimens; pages for receiving reminder messages to get prescription refills or visit a doctor; and directories of nearby doctors.
Google executives would not comment on the prototype, other than to say the company plans to experiment and see what people want. “We’ll make mistakes and it will be a long-range march,” said Adam Bosworth, a vice president of engineering and leader of the health team. “But it’s also true that some of what we’re doing is expensive, and for Google it’s not.”
Bosworth deserves credit for remaining humble, but the question we have is—will all this really improve health care? The profile idea and the prompts sound like window-dressing (web-dressing?). Sure, some people might benefit from an email reminding them to make a follow up appointment, but that doesn’t mean they’ll follow through. As for the personalized health guide, the information is out there and often collected by Web sites like WebMD. How does a simple aggregation of data help? (And when does the notion that Google—which bases its Gmail ads on the content of the messages—will have complete health profile on record stop feeling weird? The assurances that this data will remain completely confidential don’t do it for me.)
Note: Google Blogoscoped, which tracks the behemoth, has previews of Google Health Screen Shots here. Lots of sizzle but not seeing the steak.
Microsoft’s efforts, in contrast, sound a little more grounded—at least initially. Again, from the NYT:
… “It will take grand scale to solve these problems like the data storage, software and networking needed to handle vast amounts of personal health and medical information,” said Steve Shihadeh, general manager of Microsoft’s health solutions group. “So there are not many companies that can do this.”
This year, Microsoft bought a start-up, Medstory, whose search software is tailored for health information, and last year bought a company that makes software for retrieving and displaying patient information in hospitals. Microsoft software is already used in hospitals, clinical laboratories and doctors’ offices, and, Mr. Shihadeh noted, the three most popular health record systems in doctors’ offices are built with Microsoft software and programming tools.
But then the talk veers off into discussion about creating consumer-oriented tools such as online offerings “as well as software to find, retrieve and store personal health information on personal computers, cellphones and other kinds of digital devices — perhaps even a wristwatch with wireless Internet links some day.”
A wristwatch? Perhaps this would work for Dick Tracy. Yes, the current process of sending faxes and letters to get a simple medical record transfer done is onerous. But do we need a wrist watch? Just let me download my records onto a thumb drive and bid me good day.
Yes, IN VIVO Blog has a difficult time seeing all of this having any real impact from these consumer-oriented efforts. They sound great, but will they really make a difference?
While Microsoft and Google bring some much needed buzz to health care’s out-moded record keeping, there are at least two other multi-nationals worth keeping an eye on in the race to digitize health care: Siemens AG and General Electric. Keep in mind that Siemens and GE also have major plays in healthcare IT and they develop the imaging and diagnostic tests that make up the bulk of a patient’s record. Who better to lead healthcare’s digital revolution than the companies that generate the actual data patients—and more importantly, doctors—want tracked. (BTW, keep an eye out for an analysis of Siemens’ IVD approach in the upcoming Sept. issue of IN VIVO.)
Thursday, July 26, 2007
Schwan Song
Roche’s announcement that Severin Schwan, the head of its Diagnostics division, is set to succeed Franz Humer as CEO of the Roche Group next March came just hours after we’d filed a story for the upcoming issue of IN VIVO looking at Roche’s recent acquisitions, including its ongoing $3 billion hostile tender offer for anatomic pathology specialist Ventana Medical Systems. Given his recent history in diagnostics, the Schwan news would’ve made an excellent punch line to the article, which talks about the firm’s belief in diagnostics and its bet that personalized medicine--an area where innovative platforms and molecular test content will play significant if separate roles—will be key to its long-term growth.This past Monday, the IN VIVO Blog also cited a rumor that Novartis could be grooming Joerg Reinhardt, the head of its vaccines and diagnostics businesses, as successor to CEO Dan Vasella.
Is it a coincidence that both firms are turning to Dx veterans? Novartis doesn’t have an in vitro diagnostics business anything like the scope of Roche’s, nor does it have a life sciences research tools unit. But Novartis knows blood banking, to which it has applied a nucleic-acid test (NAT) based platform for virology testing. And like Roche, Novartis has a significant investment in targeted cancer therapies, for which companion diagnostics are assumed to play a vital part. (Ventana, for example, markets a molecular test to gauge patients’ potential to respond to Novartis’ Gleevec).
So maybe it's a good time to examine Roche’s strategy.
Unlike other Big Pharmas (including Novartis), Roche has dedicated itself to the in-house development of companion tests. Its molecular diagnostics unit has developed know-how around adapting microarray technology to clinical diagnostics--one of the most complex aspects of the approval process for drug-diagnostic tandems--via a series of collaborations with Affymetrix, leading to tests for mutations in the p450 and cystic fibrosis genes. Roche is applying the same tools to developing its own drugs, including a p53 diagnostic for a cancer drug that binds wild type p53. And before Roche took rights to Plexxikon’s PLX4032 cancer program, which inhibits a gene mutation present in roughly two-thirds of melanomas, the two companies had begun a diagnostics collaboration around a molecular test for the mutation. Indeed, one reason Roche paid so much for the Plexxikon compound was that the companion diagnostic could dramatically expand its market into solid tumors by targeting the same mutation in those far more common cancers.
Roche has the free cash to invest in its diagnostics businesses and is clearly aiming at personalized medicine as a principal way to bolster them long term – and importantly, also support the development of targeted drugs on its pharmaceutical side. On the conference call discussing the Ventana tender offer Schwan said flatly that Roche wants it for strategic reasons relating to its drug business. The Ventana deal “is very much driven by the synergies we have on the R&D side, by the development of targeted medicines. The real value is that we can leverage the different capabilities across the entire Roche Group,” he said. “The earlier you start the exchange of ideas between pharma research and diagnostics, the better chance you have to come in parallel with the development of a companion diagnostic,” added Roche CFO Erich Hunziker.
It’s long been held that pharma holds all the leverage when it comes to drug-diagnostics partnerships. But the demand for innovative test content to run on molecular diagnostics platforms is increasing: witness the recent upswing in deal-making, along with renewed VC interest in diagnostics. It suggests that the area's potential to drive health-care innovation by directing therapy more efficiently is finally being recognized. Even Abbott Labs noted this when, in the wake of the breakup of GE Healthcare’s bid to acquire Abbott's diagnostics businesses, Ed Michael, Abbott’s newly appointed head of diagnostics, commented to us that there are synergies between all of its diagnostics divisions--especially between the molecular and point-of-care testing businesses.
So if pharma companies truly believe in the vision – and more to the point, the necessity -- of personalized medicine, and if the development of tandem drug-diagnostic combos is best started early in development, it makes sense they’d want their senior executives to have hands-on experience with the ins and outs of diagnostics development. Finally.
Wednesday, July 18, 2007
GE's Abbott Indigestion
Now that GE has pulled out of its proposed $8.13 billion all-cash deal for Abbott Diagnostics (ADD) and Abbott’s point-of-care testing business, will anyone else step up to the plate?
We believe the explanation that it fell apart because of the complexities involved in prying them—ADD, specifically—out of Abbott.
Some analysts have suggested that compliance issues and issues over the transfer of licenses also helped scotch the deal. But while there were literally thousands of transition services agreements that the parties were going to have to enter into, in the end, it appears that the degree to which ADD is integrated into the rest of Abbott, and how difficult it would therefore be to deliver it to a company that perhaps has a different culture, very much surprised both sides. And that pain was going to persist over a protracted integration period—“a lot longer than three years,” according to one insider.
What’s puzzling is that this would not be the first time such a diagnostics business was sold lock-stock-and-barrel to a health care generalist (Siemens, for example, managed to buy Bayer Diagnostics and immunoassay player Diagnostic Products last year). Nor is GE inexperienced at handling such moves (there's too many potential links to choose from for this one to even begin to know where to start).
So we have to ask: Were the cultures an obviously terrible mix? That’s very possible, and yes, it'd be interesting to contemplate what those differences may say about each company. We’ve also heard that the first marching order for Abbott now will be to improve the level of service to its diagnostics customers, which of course suggests GE may have uncovered something specifically troubling during its preparations.
In any event, the take-home is it’s unlikely that Abbott will be looking for another buyer for those businesses. And with the exception of Roche, which unlike Abbott, views diagnostics as intimately connected with its drug development ambitions and personalized medicine, there aren’t really any very large in vitro diagnostics (IVD) players left from whom GE could wring out efficiencies, exploit scale, and improve productivity in the IVD market the way it expected to with Abbott.
