Don't Come Knockin' On My Door

The pharma industry doesn’t need more stats to tell it that knocking on doors doesn’t work any more, but some new figures blast that cold reality. (A comprehensive review of what needs fixing in pharma's commercial model is in the December IN VIVO. Our take on Merck's stab at reinvigorating its commercial presence is here.)

The latest data comes from California-based market research firm SK&A, which found the percentage of doctors who require reps to make appointments for visits rose 22 percent between June and December 2008 from 31.4 to 38.5 percent (of doctors who see reps). The number of physicians who won’t even see sales reps at all rose from 22.3 percent to 23.6 percent (of all surveyed).

Put another way: about 40 percent of general practitioners--that is, the ones who see reps at all--now require appointments, up from 33 percent six months ago. The trend rose for specialists too-from 28.3 percent in June to 36.6 percent in December. Every kind of practice and specialty is getting tougher, although specialty physicians are more likely to completely bar reps than GPs. Among the toughest to get to: pathologists, diagnostic radiologists, and neuroradiologists. No specialty stood out as particularly friendly, although dermatologists, allergists, and diabetes specialists were least likely to impose total lock outs.

The survey didn’t ask why doctors are increasing their restrictions, but SK&A researchers do speculate. Doctors are busier, under pressure to see more patients – and, affiliated with large organizations that increasingly institute system-wide rules. Not surprisingly, then, health systems are the most restrictive: more than half require appointments and 35 percent forbid rep access altogether. Of free-standing medical practices, those owned by hospitals stand out: 44.6 percent of those that see reps require appointments, while 31 percent keep their doors shut.

Lest anyone dismiss this data as fly-by-night, SK&A says it conducted telephone interviews with 227,000 medical practices representing 640,000 doctors—that’s nearly all of the active practicing physicians in the U.S. The response rate was 94 percent.

There is a silver lining. Some 76.4 percent of those surveyed, including the group that requires appointments, still see reps. And those appointments could be more productive. The survey didn’t measure quality of interaction, but SK&A CEO Dave Escalante points out that doctors who agree to visits by appointment may be opting for higher quality time with their rep, which scheduling in advance could provide. SK&A, however, didn’t look at the reasons for the new barriers to access or the quality of doctor-rep relations, although multitudes of others have.

The message? Well it hardly needs to be repeated, but hard numbers always resonate: large armies of sales forces are a model that just won’t work anymore.--Wendy Diller

image from flickr user matt.davis used under a creative commons license.

Merck Bulks Up With Insmed FOB Acquisition

Just about one year ago, Insmed scientists went on a viral marketing campaign exhorting the virtues of follow-on biologics with a YouTube video entitled "Follow-On Biologics--Tell your Story." If you ever wondered how much that video was worth to Insmed's bottom-line, you can stop wondering. The answer is $130 million.

That's how much Merck agreed to pay for all the assets related to Insmed's follow-on biologics platform.

The deal, announced on February 12, extends Merck's biologics capacities tremendously, giving its Merck Bioventures unit two additional clinical stage programs--a Neupogen follow-on called INS-19 currently in Phase III, and a Neulasta follow-on in Phase I known as INS-20--as well as preclinical versions of Epogen and an interferon-beta 1b molecule.

"Insmed's pipeline of follow-on biologic candidates presents the opportunity to expedite Merck's entry in the biologics marketplace," said Frank Clyburn, SVP and general manager of Merck Bioventures in a press release announcing the news.

But this deal was also very much about adding manufacturing capacity--50,000 square-feet based in Boulder, Colorado to be exact. In addition to a pipeline of products, Merck gets a state-of-the -art "biologics process development analytical laboratory," manufacturing facilities, and 70 protein experts to run it. A pretty good deal when you reckon that bioprocessing plants can cost half a billion or more to build from scratch.

Even better, apparently the Boulder plant offers yeast-fermentation capabilities essential to the glycosylation process Merck is already using via its next-generation GlycoFi technology. The site’s production capacity, along with the expertise of the existing staff “gives [Merck] in my view an accelerated head start on developing these products,” Geoffrey Allan, President and CEO of Insmed, asserted in an interview with "The Pink Sheet" DAILY.

And apparently Merck wanted the assets--both the products and the capacity--enough that they were willing to purchase them outright from Insmed. None of this staggered deal-making via CVRs that we've seen so much of lately. Indeed, the agreement provides initial payments of up to $10 million for INS-19 and INS-20, with the remaining $120 million due at the close of the transaction, which is expected to occur by March 31.

When Clyburn, Clark and the rest of the Merck gang announced the creation of the Merck BioVentures unit in December, they unveiled an ambitious plan: the launch of at least six FOBs in the 2012-2017 time period based on an R&D spend of $1.5 billion over the next seven years. Relying heavily on the proprietary glyco-engineering technology housed in GlycoFi, the company already had one clinical candidate--a pegylated erythropoietin for anemia called MK2578 in Phase II development that is designed to compete with Amgen's Aranesp.

But even with GlycoFi's technology in house, Merck clearly felt the need to add additional capabilities--and quickly--to reach its product launch goals. The Neupogen and Neulasta follow-ons give the unit much greater heft even as it ponders the vastly different economic model associated with FOBs. (To date, Merck has been mum about future pricing strategies for products like MK2578 or INS-19.)

If Merck's creation of its BioVentures group got our industry talking about pharma's role in FOBs, you can expect the clamor to grow even louder now. The company's willingness to fork over $130 million for Insmed's full capabilities shows that it is playing offense when it comes to FOB capacity. Indeed, Merck and Teva have emerged as the preeminent players in pharma's race to develop FOBs.

Recall that Teva, through its acquisition of Barr last year gained a G-CSF biosimilar, TevaGrastim, which is currently marketed in Europe. Its 2008 acquisition of CoGenesys, like Merck's 2006 purchase of glycoengineering play GlycoFi, means it also has the next-generation technology necessary to be a big FOB contender. Moreover, just last month, Teva itself made sure it wasn't limited in terms of its own bioprocessing capacity by inking a deal with the Swiss contract manufacturer Lonza to develop, manufacture and market generic equivalents of selected biological products.

In early January at the Goldman Sachs Healthcare CEOs Unplugged conference, Teva's Bill Marth indicated just why his company has been so active in lining up FOB capabilities: "You don't have to own them all...but you're going to have to have all the capabilities within your sphere of influence in order to get to market," he said at the time.

Merck is clearly following that same mantra with its Insmed deal--and probably isn't finished wheeling and dealing yet. "We are looking at additional partnerships," Clyburn told IVB one month ago in an interview at the J.P. Morgan Healthcare Conference.

(Image courtesy of flickr user Mysterytune through a creative commons license.)

The March of the CVRs

Lo, and behold: it is biotech's winter and thus has the March of the CVRs begun. (CVR is a contingent value right, these days the acronym for earn-outs in structured deals.) So far in 2009 every biotech acquisition where terms have been disclosed--not just acquisitions of private companies--has included some form of earn-out.

• This week's acquisition of Ovation Pharmaceuticals by H. Lundbeck boasts a headline figure of $900 million. $300 million of that is contingent on the regulatory progress of Ovation's Sabril anti-epileptic. Our Pink Sheet DAILY story on the deal can be found here.
• Cephalon has paid $100 million for the option to buy Ception and its antibody for eosinophilic esophagitis. If Cephalon likes the results of the Phase II program it can pay $250 million more to seal the deal.
• The Medicines Co. paid $2/share, or $42 million, for Targanta Therapeutics in a deal that could see earn-out payments of an additional $4.55/share, depending on meeting regulatory and sales goals for Targanta's lead antibiotic.
• Endo has decided to move beyond pain and acquire Indevus Pharmaceuticals for $352 million in cash plus a potential $234 million in regulatory earn-outs related to Indevus' Nebido testosterone candidate and octreotide implant. Our coverage of that deal is here.

The biobucks figures associated with the majority of industry alliances are mostly jokes. Come on, you know the ones. The $1.7 billion headline figures that are reached only after 6 compounds make it to market in 137 countries and each become blockbusters in multiple indications.

But we think of the headline figures for acquisitions that include earn-out dollars a little differently. These risk sharing arrangements at least have a shot. In fact they are more like the little emperor penguin eggs on the feet of male emperor penguins during an Antarctic winter. Only after the female's long trek to the sea and back in absolutely miserable and ruthless conditions to secure enough regurgitated fish to save the family will we know if anybody involved in this bizarre ritual is going to make it. The only thing missing in the biotech version is a Morgan Freeman voiceover.

CVRs are by no means new. But the conventional wisdom is that they flourish in tough economic times, and so by that reckoning we should be seeing more deals sweetened with downstream earn-outs. (Or, looked at another way, more deals where pharma takes on less risk.) Because of the relative ease of administration CVRs have usually featured more in private company acquisitions than in public deals. Looking at private biotech deals over the past four full years though suggests a decline in this kind of structured acquisition, a phenomenon we explore in this Start-Up article from December. (See chart below.)

The latter two deals on our 2009 list are for publicly traded biotechs. Financial details for the rest of this year's biotech acquisitions so far--Helsinn's takeover of Sapphire and Symphogen's buyout of beleaguered Receptor Biologix's technology--remain undisclosed. We wouldn't be surprised if either of those deals were similarly structured. If these CVRs do anything, they bring companies together to share risk: might we suggest they'd be a way for CV and Astellas or even Roche and Genentech to come to terms?

Maybe even. So as we have been saying: expect earn-outs, structured deals, CVRs--whatever you want to call them--to feature heavily in the dealmaking landscape for the foreseeable future. And then go ahead and root for those frigid penguins.

image from flickr user sidereal used under a creative commons license

We're Not the Beast You Thought We Were....

"When people think about Sanofi Aventis, they think about Plavix and about Acomplia. Plavix is going away, and Acomplia never came."

That just about sums up Sanofi Aventis' quandary. And it came not from disgruntled investors but from the group's new CEO, Chris Viehbacher, during the company's full-year results presentation in Paris today. (Which, in a sign of the company's new world-friendly face, was held at 2pm CET, not early morning when the US is asleep.)

Okay, so he was trying to dispel various myths about Sanofi Aventis--including, one gathers, those he himself entertained before joining ten weeks ago (he missed out on the top-job at GlaxoSmithKline).

He went on to say: "But there's a lot more."

The 'more' is: Sanofi's vaccines business, ranked number one (if you include Sanofi Pasteur MSD, a joint venture with Merck), a foothold in generics (read: Zentiva), the most geographically-spread business in the sector (spread about a third each across the US, Europe and RoW; Sanofi claims to be #1 in sales terms in BRIC and Mexico) and a bit of OTC. All of the starting points, in other words, to create a 'diversified health care business'.

Heard that goal before? It was Kindler at Pfizer a couple of weeks ago, justifying spending $68 billion on Wyeth. We don't need to do that, Viehbacher argued; indeed, "Pfizer had to buy Wyeth just to get where we are--a major player in vaccines, with biologics and OTC."

Okay, so maybe he had a point in dispelling what he saw as another myth: that Sanofi Aventis has missed the biologicals boat. "30% of our sales come from biologicals," he told the audience, referring to once-daily insulin Lantus, low molecular weight heparin Lovenox (whose generic exposure is a particular uncertainty for the business) and vaccines. Not necessarily your anti-TNFs or anything like that (and it's not as if Sanofi has been at the forefront of buying new technologies like RNAi either) but large molecules nevertheless.

But Viehbacher wasn't trying to pretend that Sanofi-Aventis is ok, really. It isn't; the company's three years from a patent cliff and doesn't have enough new products. That's why he kept talking about transformation and getting back to growth. And one myth he didn't try to dispel was that Sanofi-Aventis has been inward-looking. "We have not looked outside of our walls enough," he acknowledged. That's about to change (though it won't be mega-mergers): €4 billion in annual cash flow and virtually no debt to finance will help.

We thought Viehbacher did a good job of setting out what he has to work with, and what he wants to do. Here are some other messages that came through (to us, at least) from the flurry of PR and appointments launched concurrently:

1. We’ve learnt from our mistakes.....(that means Acomplia)
2. ... thus our regulatory person is now our CMO (so we won’t get stuck at the authorities again, no way)
3. ... and we keep repeating that "patient safety is of the utmost importance to Sanofi Aventis," just in case you still remember how we tried to foist a CNS-meddling drug on you to help you lose weight (that means Acomplia)
4. To push home that point a bit more still, we've created a Benefit/Risk Assessment Committee which our new CMO will chair
5. Our CFO is becoming our chief strategy officer (CSO) so the future is about spending MONEY on DEALS (but no, we don't plan to buy Regeneron as that would spoil the bloom)
6. We've hired a top-notch scientific advisor in Dr Elias Zerhouni (lauded in the New York Times yesterday) to help us assess what platform technologies and partners we need, tell us how well we're doing (or not), and keep our feet on the ground. (We weren't great at that before.)
7. He'll also help us sort out R&D. (And we'll give our ex-employer a dig by saying the jury's still out on the CEDD structure.)

Investors Dig Baby Formula, Not Yet Ready for Solid Foods

Against the odds and a miserable market Bristol-Myers Squibb milked investors for $720 million yesterday. According to Reuters, BMS sold 30 million shares in Mead Johnson Nutritionals at the top end of its previously announced $21-24 range.

MJN, which begins trading on the NYSE today, only feels like the first IPO in about seventeen years. But it is the first health care IPO in the US since 2007. Still, nobody seems to be kidding themselves that Mead Johnson's introduction to the public markets means anything for the rest of the industry's IPO hopefuls.

But the deal is huge for BMS, which has continued to execute on its specialization strategy designed to remake the company as a pure play biopharma. Now, to paraphrase the old chestnut, BMS gets to have its baby formula and drink it too.

As we wrote last September, by maintaining an 85% stake in Mead Johnson as well as the lion's share of voting rights in the company, BMS gets to achieve its sought-after managerial focus while at the same time clinging onto the benefits of owning a diversified portfolio of assets.

As long as it keeps more than half of the Mead Johnson shares, it will be able to consolidate Mead's top and bottom lines, subtracting the proportion of net income attributable to the minority shareholders only at the very bottom of the P&L, in minority interests.

"I recognize that the drug industry is more uncertain today than 15 years ago," BMS CFO Jean-Marc Huet told IN VIVO last year. And that the outlook for Mead Johnson's industry "is far more stable." (The nutritionals company is expected to grow faster than BMS's core drug business.) But in spinning off those MJN shares, "we haven't increased Bristol's risk profile since we still consolidate its sales and earnings," he said. Likewise, it can even take its pro-rata share of Mead Johnson's cash flow--so won't face the same criticism Pfizer has with the sale of its OTC business to Johnson & Johnson in 2006, or even Bristol itself with the spin-off its orthopedics group Zimmer Holdings in 2001. (Zimmer shares have appreciated significantly since then, while BMS's have been roughly halved.)

Meanwhile, Bristol's managers can focus 100% of their attention on the pharma business and dealing with the 2011 patent expirations of both Plavix and Avapro. Freed from the other businesses, Bristol managers won't get clouded with their issues. And with Mead Johnson traded separately, followed by a different group of analysts, it should get the benefit of their attention, rather than being ignored by drug-stock researchers.

Could other Big Pharma benefit from a similar strategy? Novartis is well on its way to achieving a similar arrangement with Alcon (a deal we spent considerable time analyzing as part of our DOTY competition). Pfizer seemed headed towards a more concrete restructuring when it split out its various business units last year. Now that it plans to add Wyeth's consumer and vaccines businesses to the mix (presumably Wyeths biologics and small molecule drugs will get lumped in with Pfizer's pre-existing business units) perhaps a similar argument can be made there.

It could surely use the proceeds to pay down that expensive debt.

image by flickr user nerissa's ring used under a creative commons license

Genentech Wanted Roche To Pay How Much?

How about $112 a share? No kidding.

That's what Genentech's lead director, Charles Sanders, told Roche chairman Franz Humer to expect back on December 12. That was just before Genentech's financial adviser, Goldman Sachs, got in touch to discuss the drugmaker's proposed bid for the biotech. This little tidbit was revealed in the tender offer Roche filed late Monday with the U.S. Securities and Exchange Commission (please see page 15).

You may recall that, last July, Roche initially offered $89 a share for the 44 percent of Genentech it doesn't already own, but late last month, lowered the price to $86.50. Why? All sorts of reasons, starting with the worsening global economy and comparable public company valuations that decreased and, in the process, lowered applicable multiples Roche used to value Genentech shares.

Genentech's fetching demand ultimately prompted a January 9 meeting in New York between various Genentech and Roche legal and financial advisers, as well as senior Roche R&D execs, to debate the virtues of a rosy financial model the biotech devised in November. Genentech used this to justify its $112 price tag, while Roche claims the financial model was hokum.

The following week, Roche's advisers, Greenhill, sent Goldman a list of "key areas of disagreements, which included, among other things, assumptions regarding annual price increases; pipeline productivity; development costs; the value of the extension of Roche's 'opt-in' rights relating to (Genentech's) products outside of the U.S.; Avastin adjuvant (trial) indications; future revenues for Lucentis, Herceptin and Raptiva, and potential tax benefits." In other words, they disagreed over just about everything.

And so Roche upped the ante by taking a new, lower offer directly to Genentech's shareholders, although some Wall Street analysts believe Genentech could easily be worth $100 or more a share, if upcoming Avastin adjuvant trial data is positive.

Of course, this is Roche's version of events, which the drugmaker is using to explain its alleged frustration with Genentech's board these past few months, as well as its rationale for playing hardball with its newly lowered bid.

What will Genentech do now? Not surprisingly, a special Genentech board committee urged shareholders "to take no action at this time" in this statement. But it won't be long before we know more. That's because the special committee indicated it would take a formal position on the Roche offer "within ten business days, and will explain in detail its reasons for that position by filing a Statement on Schedule 14D-9" with the SEC.

And we can't wait. Maybe the biotech will raise its asking price. And why not? This is poker, after all.

(Image courtesy of flickr user fhwrdh through a creative commons license.)

NICE Deal, Celgene

We imagine that Celgene is pleased with its cost-sharing scheme around multiple myeloma drug lenalidomide (Revlimid), approved, at least provisionally, by the UK cost-effectiveness watchdog NICE.

Having failed to get its GBP4,300-a-month drug past NICE the first time around, Celgene had a re-think, and came back with a plan. The UK's National Health Service, it suggested, should pay for the drug for 26 treatment cycles--that's about two years' worth--in those patients with previously-treated disease. Celgene would fund the drug (used in combination with dexamethasone) in patients benefiting from it thereafter.

Sound fair? The thing is, that the median time to progression figure for patients with this disease, as per trial data presented by Celgene to back up its submission, is 11 months. (TTP is what's typically used to determine whether patients continue to receive a therapy--in other words, whether it's working). So Celgene's onto a good deal, right, since it won't have many patients to fund?

Wrong, argues Celgene. It's just not possible to find the true median TTP or overall survival data from these trials because of limited follow-up and patient withdrawals. So Celgene used a model to extrapolate what is sees as more accurate TTP and survival data. That, is says, reveals that 15-20% of patients may continue to benefit from the drug beyond 26 treatment cycles. Even that estimate, the company argues, might be too conservative, since much existing overall survival data is based on current clinical practice, whereby Revlimid, an immunomodulatory agent, isn't part of the mix at all.

Those arguments were clearly sufficient for NICE (although it's worth mentioning that the agency has been under significant pressure to make a popular decision in recent months). And Celgene had two major tailwinds helping it: a) Recently-issued NICE guidance on end-of-life medicines, which relaxes the cost-effectiveness criteria for products that extend life for those with terminal diseases affecting fewer than 7000 new patients each year, and b) simple administration.

Celgene will administer the 'you-pay-then-we-pay' scheme itself, and easily, piggybacking on the drug's existing risk minimization plan, which is a condition of its license. (Since the drug is related to thalidomide, it must not be used in pregnant women.) That's a big deal, since the main barriers to any risk- or cost-sharing scheme in the UK, as we suggested in a previous post, appear to be practical ones.

Some critics say that NICE is bowing to popular pressure, with this and with recent revised guidance around kidney cancer treatment Sutent. That's a shame, they continue, because if Obama does copy it or any aspect of it in the US, he should copy the old NICE, not what some describe as the more submissive new one.

Now sure, with more risk-sharing proposals on the way, its value-assessment methods under scrutiny, plus the bunch of other responsibilities that come with its increased influence on drug pricing, NICE is going to have to be smart. (We'll have more about this in the next edition of The RPM Report.) But it's hard to argue with the ethics of providing end-of-life medicines, and of increasing patient access. It's also hard to argue with the economic benefits that come to Britain if access improves. Besides, at least companies and the UK Department of Health are engaging on such matters, even if the outcomes may appear, to some, to favor one side or the other.

While You Were Awaiting Stimulus

While the rest of nation waits for Congress and President Obama to finally settle on a stimulus package that will jump start/drag down the economy, Sports Illustrated reported that the Yankee third-baseman Alex Rodriguez received a personal stimulus package back in 2003. The magazine reported that Rodriguez flunked a steroid test while playing shortstop for the Texas Rangers.

No word from A-Roid on the charges, but no matter. (Update: Rodriguez admitted it to ESPN.com.) We would still like to , we'd much rather hear what Obama will say tonight at his prime-time press conference. Until then ...

• Drug stocks have historically been safe harbors in troubled economic times, but some harbors are clearly safer than others. Seeking Alpha reports that publicly traded biotechnology companies have outperformed pharma companies since the stock market hit bottom in November. Why? We'll give you two reasons: Pipe and Line. Okay, that’s really one reason.
• Just a few days after news surfaced that GlaxoSmithKline plans to make deep, deep job cuts as part of a plan to shed £1bn a year in costs by 2011, the Wall Street Journal reported the pharma giant is in talks to buy Indian generic-drug company Piramel Healthcare Ltd. for roughly $1.5 billion.
• If you see Charles Darwin, tell him Happy 200th Birthday from In VIVO Blog then feel free to call the San Francisco Chronicle or The Ghost Hunters .
• Pork may be all the rage in Congress. But the FDA is all about the goats (no, we're not making a crack on agency personnel.) The agency approved first product derived from a genetically engineered animal, with the honor going to genetically modified goats. The Wall Street Journal reports on the approval of Atryn, developed by GTC Biotherapeutics Inc. for the treatment of a rare blood-clotting disorder known as hereditary antithrombin deficiency.
• Carl Icahn took a little time away from erecting his siege tower outside Biogen Idec’s headquarters to give his two-cents in the Wall Street Journal on President Obama’s salary cap for those Wall Street execs obtaining federal bailout funds. His take: the cap is understandable but wouldn’t be necessary if management were more accountable to shareholders.
• And no, “While You Were…” post would be complete without some mention of a Philadelphia sports team, so …yada, yada, yada ... aren't the Phillies great ... blah, blah, blah...they signed Ryan Howard. Enjoy.

DoTW: The Calm after the Storm?

Last week was a tough act to follow on the dealmaking front. No, we still haven’t forgotten Pfizer’s $68 billion cash-and-stock collision with Wyeth; the fallout, so to speak, continues, and you can read our ongoing coverage here and here.

And you know this blogger’s favourite R&D question: how will Pfizer continue to get smaller in R&D while it integrate Wyeth’s thousands of R&D staff? We think the federation-of-biotechs might get a bit out of hand with too many members…

Other Big Pharma CEOs, unsurprisingly, have felt compelled to add their own merger sturm and drang to the mix, usually in the context of (disappointing) full year earnings. Merck’s Richard Clark isn’t ruling out ‘a major acquisition’—a bit of a change of tune for the ‘we’re great at R&D and don’t need anyone else’ line of yesteryear—but GSK’s Andrew Witty is.

“We have real confidence in our strategies going forward,” Witty said during this week's results meeting, “and in our people’s ability to deliver.” (The ‘remaining people’s’, he meant, given that several thousand staff are reportedly due to go.) When you’re buying into generics, your vaccine sales are up 20% and you’re touting the toothpaste (oral health turnover was up 6%), who needs a Wyeth or a Bristol? Nah, bar the odd licensing deal (with Idenix, see below) GSK’s close friend these days is retailer Wal-Mart, which is helping it make money from 30-year old Ventolin—at $9 a pop, uncutting many generics.

This week was another busy one for Roche on its Genentech-hunt; with pharma sales down 4% in 2008 and net income down 5%, the Swiss group has re-iterated that “there’s no Plan B” as far as buying its long-time partner is concerned. And to help pay for this $42 billion spree (slightly lower than it was, but which may, as we have noted, get far more expensive when Avastin data in colorectal cancer appear in the next couple of months), “we’ll launch a bond,” declared Chairman Franz Humer.

Bonds are certainly the thing do be launching, it seems: Novartis this week issued $5 billion worth ($2 billion of five-year bonds, and $3 billion of ten-year bonds), spreading hope that Pfizer will be able to finance Wyeth more cheaply, and that Humer’s plan may work. Catherine Arnold at Credit Suisse says that strong demand for the Novartis bonds may mean there’s an ‘appetite’ for quality paper. (There certainly appears to be in Europe, where German healthcare group Fresenius last month raised a whopping $800 million through an unsecured senior notes offering, comprising both Euro and Dollar tranches.)

Meanwhile the winds of change are swirling at both Biogen Idec and Vertex. This week came news that Carl Icahn has nominated four people to Biogen's board. Because the company holds staggered elections for board nembers, even if all of Icahn’s nominees were elected, it wouldn't be enough to take control of the biotech. Still the interpersonal dynamics could make for some interesting meetings...

And on Friday, founder and CEO Josh Boger announced he is retiring from Vertex in May, making way for ex-Shire CEO Matt Emmens. Some analysts, speaking to Reuters, say this will clear the way for a company sale; certainly with a potential Phase III blockbuster in Hepatitis C drug telaprevir, there should be some interest.

Or maybe not. Analysts at Leerink Swann reckon this shift makes it less likely that Vertex will be sold anytime soon--indeed, while at Shire, Emmens was certainly keener on buying than selling. Instead, it seems Emmens is better placed to take Vertex into its next, more commercially-focused phase. Either way, IVB expects to be writing about Vertex--whichever side of the dealmaking table it ends up on-- in the near future.

But enough of Boger, buying bonanzas, or bonds (or alliterative allusions for that matter). What about the actual deals? Not many this week; call it the calm after the storm. That said, GSK and Idenix kicked up a little breeze at the last minute on Friday...



GlaxoSmithKline/Idenix: What? It's not an option-deal! GSK has emerged (temporarily perhaps) from option-mania to sign a straightforward license with Idenix for exclusive worldwide rights to IDX899, a novel non-nucleoside reverse transcriptase inhibitor in Phase II for HIV/AIDS. It's a once-a-day; it's apparently got good defenses against drug resistance; and is potent at low doses. So GSK put up $34 million up-front, split 50/50 between cash and the purchase of Idenix stock at $6.87 per share. In an interview with "The Pink Sheet" DAILY, Idenix Chief Financial Officer Ron Renaud said GSK paid a double-digit premium on the average share price at closing over the 90 days prior to the deal. Idenix also stands to make $416 million in downstream regulatory and sales milestones and off-loads all further development responsibilities to GSK as part of the deal.

Actually, it's not GSK, it's GSK's Infectious Diseases Center of Excellence for Drug Discovery (CEDD) that's done this transaction. So what, you ask? Well, if you're into R&D structures, it's an important distinction. The ID CEDD is one of the two GSK CEDDs that are in charge of their own deals as well as internal R&D. That means, in theory, quicker negotiations, a smaller more focused team for the biotech to talk to, and, we're told, fewer committees. So although the funds came from GSK-central, the deal will be budgeted through the ID CEDD (whose remit goes from discovery to POC) and the corresponding later-stage Medicines Development Unit (which takes compounds from POC through to approval).

With GSK taking over development of ‘899, Idenix now has greater capacity to focus on its three hepatitis C programs, led by nucleotide prodrug IDX184, which moved into a Phase I/II proof-of-concept study in January. A number of partners were reportedly interested in Idenix's HIV asset, which explains the healthy down-payment GSK had to pay. Certainly Idenix has been looking to partner it since 2008, when proof-of-concept data first became available. But complicating negotiations was the fact that Novartis owns a majority stake in Idenix, giving it right of first refusal on the biotech’s entire pipeline up through POC. When Novartis ultimately decided to pass on the option, GSK quickly established itself as the top partnering choice. “Glaxo’s extensive knowledge in HIV and comprehensive clinical plans (part of what impressed IDIX management) raise the probability of success and commercial potential,” writes ThinkEquity analyst Jason Kolbert in a Feb. 6 note.

Cephalon/Immupharma; No calm for UK biotech Immupharma this week either, in fact. It was party-time, take two. Cephalon had already flooded the group with cash last November when it paid $15 million for an option to license lupus candidate Lupuzor, a CD4 T-cell modulator in Phase IIb trials. This week, based on promising interim IIB data, Cephalon exercized its option, paying a one-time license fee of $30 million. Bye-bye fundraising, as far as Immpharma’s management is concerned, and, for the biotech’s shareholders, hello dividend. Immupharma may receive further cash milestone payments plus sales royalties. Cephalon will pay for the Phase III trials, which will start this year, and will commercialize the drug—hailed as the first specific medication for lupus sufferers. It works by desensitizing the body to the causes of the disease, according to Immupharma’s CEO Dimitri Dimitrious (see "The Pink Sheet" DAILY, Nov 26, 2008); analysts say the drug could one day bring Cephalon $4 billion in annual sales. Cephalon hopes this product deal will complement its similar, option-style deal with Ception Therapeutics inked last month. In that deal Cephalon put $100 million on the table for the option to purchase all remaining shares in the private group for another $250 million if Phase IIb/III antibody reslizumab works out. The antibody is in trials for a rare inflammatory disease in children; this and the lupus drug will in theory provide Cephalon with the beginnings of an inflammatory diseases franchise. Check coming issues of "The Pink Sheet" DAILY for a Q&A with Cephalon chairman and CEO Frank Baldino for more on the company's future direction.

Novartis/Ablynx: Meanwhile the love-in between Novartis and Dutch antibody group Ablynx continues—they extended their drug discovery and development alliance for a second time, turning this into a three-and-a-half year relationship. More research funding and potential license fees and milestones for Ablynx (but we don’t know the numbers), and, one assumes, a Novartis that’s very excited by Nanobodies. Forgotten what they are? Proteins that behave like conventional antibodies but are a lot smaller; their design resulted from the observation that camels and llamas have fully-functional antibodies that lack light chains. UK analysts say Ablynx is now “set to become a serious force in biotech”, which we think means that the company has enough cash and partners to get its products into late-stage development without having to expose itself to the elements. If things get any better with Novartis, it might become a serious option for them, too (they've got plenty of money, remember)—although Ablynx’s other partnerships, with Boehringer Ingelheim, Merck Serono and Wyeth (soon-to-be Pfizer) may complicate matters.

Oxford BioMedica/Foundation Fighting Blindness:UK gene therapy group Oxford BioMedica received a $250,000 investment from the Foundation Fighting Blindness this week as part of the group’s ongoing collaboration to develop StarGen, a gene therapy treatment for Stargardt’s disease, a juvenile retinal degenerative illness that affects children. Not a big deal, and certainly not the answer to Oxford’s financing issues—it’s likely to need money by the end of 2009, say analysts, unless it can sign a partnership for its early clinical-stage Parkinson’s treatment ProSavin—but a sign at least that some charities still have some money to push forward their therapeutic interests.

Photo courtesy of flickr user Stuck in Customs through a creative commons license.

Can Anyone Spare A Statistics 101 Text?

We know statistics is not everyone's strong suit. Take the folks at Sequenom, which later this year hopes to market a blood test called SequreDx to screen for Down syndrome.

Yesterday, the diagnotic test maker acknowledged some errors in a presentation given the previous week. Such as? Well, Sequenom misused technical terms to describe the test's accuracy, and miscalculated the percentage of unresolved results from its RNA-based test, according to the Associated Press.

To be specific, Sequenom said its test had a positive predictive value of 99.9 percent, but meant to say specificity was 99.9 percent. Positive predictive value is the proportion of samples with positive test results who have the disease, while specificity is the proportion of healthy patients that are correctly diagnosed, the AP notes. The presentation also confused negative predictive value and sensitivity. In these samples, however, both rates were 100 percent.

And so a contrite Harry Stylli, Sequenom's ceo, tells the AP the mistakes were "editorial" and the underlying test data was correct: in 858 samples, the SEQureDx correctly identified 28 cases of Down syndrome in high-risk pregnancies. There were no false negatives, or samples the test failed to detect the presence of Down syndrome, and one false positive, in which the test returned a positive result and further testing showed the fetus was not carrying the condition.

The correction, he said, "led to folks basically saying we were cooking the books, and that led to the slide in the stock." Indeed, Sequenom shares fell nearly 17 percent at one point this week and Lazard Capital Markets analyst Sean Lavin wrote investors that the changes hurt management credibility.

What are the odds of something like this happening again? We have no idea. But we do have one suggestion - don't ask Sequenom management to make the calculation.

image from flickr user mac steve used under a creative commons license.