Jim Greenwood: The Movie

The Biotechnology Industry's Organization's policy briefing went very smoothly on Sept. 9 except for one question. BIO was "pleased" with how the follow-on biologics debate was turning out, and didn't even appear upset about a potential $2.3 billion annual excise tax that might be imposed as part of healthcare reform. But the association was flummoxed when asked about the Supreme Court case on campaign finance law that the Justices were rehearing the same day. Centered on a conservative advocacy group's ability to distribute the documentary "Hillary: The Movie," the case could have broad implications for how businesses can spend money to influence elections.

Did BIO have a position on how corporations should be treated in this First Amendment context? "I'll tell you as soon as I'm advised by counsel," BIO President Jim Greenwood said. He tilted his head away from the microphone and towards General Counsel Tom DiLenge, who had hopped up from his seat and was now crouching behind Greenwood's chair. After the pair whispered in the classic consolatory pose, BIO's new chairman, Stephan Sherwin, said, "I just felt like I was on C-SPAN."

"I'm told we don't have a position on this issue, and we don't," Greenwood said. "We have a political action committee and use it the way that political action committees are used, but we have not seen a need to take a position on that issue." Sherwin, the CEO of Cell Genesys, also demurred on the question.

"The best thing that corporate executives can do is contribute to the BIO PAC," Greenwood quickly added, demonstrating the fund-raising acumen that helped him serve six terms in Congress.

Top Facet Investor's Big Sell-Off

When we wrote earlier this week about Facet Biotech's rejection of Biogen Idec's $356 million hostile bid, we mentioned that Facet's top investor, Baupost Group of Boston, held about 18% of the company as of June 30.

It doesn't anymore. In a regulatory filing Wednesday, Sept. 9, Baupost said it sold about 25% of its Facet stake, or about 1.2 million shares, to drop its ownership to 14%. It made the sale Friday, Sept. 4, the same day Biogen went public with its takeover bid of $14.50 a share. The public bid was 50 cents a share lower, Biogen said, than an earlier private bid it made in late August.

Baupost's new ownership percentage is noteworthy because it drops the investment firm, founded in the early 1980s by Seth Klarman, below the 15% threshold that Facet drew as the trigger for the poison pill plan it adopted in response to Biogen's hostile intentions.

Announced Tuesday, Facet officials said at first that the plan grandfathered in Baupost. Not so. Because Baupost's sell-off occurred on Sept. 4, it predated the adoption of the poison pill plan by three days. The firm is not grandfathered in, after all, according to a Facet attorney.

Klarman did not respond Wednesday to a call for comment. Then again, his words don't come cheaply, though here's a free videoconferenced talk he gave to the business-school students at the University of Western Ontario. (Goooooo, Mustangs!) Klarman is the author of the 1991 book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor, which is out of print but available on Ebay starting at $800, last time we checked.

The IN VIVO Blog Podcast: Elan and Biogen's Day in Court

Welcome to the latest installment of the IVB Podcast. Today we're putting on our LA Law costumes and analyzing everyone's favorite courtroom drama.

With deadlines looming, there are several unanswered questions swirling around the complicated Biogen Idec-Elan-Johnson & Johnson kerfuffle. Thanks to a federal judge's surprise ruling last week in a Manhattan court, Elan has until Sept. 26 to fix the breach of contract the judge said it committed in its Tysabri licensing relationship.

If it doesn't fix the breach, Elan could lose its half of Tysabri, which stands to hit $1B in sales this year. But in fixing the breach, Elan must also negotiate with J&J, which as part of its sprawling $1.5 billion deal for Elan stock and Alzheimer's assets, thought it had a side deal with Elan to help buy out Biogen's half of Tysabri (an event triggered if and when Biogen is ever bought out).

Confused yet? Hang on: This side deal, though, turned out to be the source of the breach, the judge said -- by giving J&J the option to help with the financing, Elan had assigned its Tysabri rights without its partner Biogen's consent. And if J&J doesn't like the way Elan is reworking the side deal, it can walk away from the entire Elan/Alzheimer's deal on Sept. 15.

Follow along as Alex Lash and Brenda Sandburg walk us through this mess, by clicking the button below. Hey know what? You can access the podcast via iTunes also.

Is There a Drug Lag? Polls NOW Open

Apologies to all who tried to vote in our poll on the so-called "drug lag" between the US and FDA. The link in our email yesterday was incorrect. Fraud? Ballot box stuffing? No. Typo? Yes.

Here is the correct link to the poll: http://answers.polldaddy.com/poll/1955904/

And here is the original post (with the poll embedded).

Sangamo Surprise: Tail Wags Dog

When we checked news on health care stocks and saw that Sangamo Biosciences was up following a press release announcement of a paper pointing to the potential use of its zinc finger nuclease technology to modify human stem cells, we did a double take. It took us a little while to settle back into work mode after the long Labor Day weekend. But we could have sworn we had discussed this paper with colleagues already, several weeks ago.

Indeed, the paper's official release date was August 13, when Nature Biotechnology announced the study's advance online publication (AOP). And the study was accompanied by a press release from the Whitehead Institute at MIT, where the work was done by Rudy Jaenisch’s group. So why did Wall Street only react to it yesterday?

Because Sangamo only put out its PR on the “news” Tuesday morning, when the print edition of NBT came out. According to Sangamo, whose scientists were among the paper's coauthors (but not correspondents with the actual journal editors), the company was first alerted to the AOP the day before it went live. The company was also caught off guard because the paper had only been accepted two days before that, on August 10 – a remarkable and unexpected turnaround time.

With such short notice and summer schedules – and maybe doldrums too – they saw no reason to scramble. (And frankly, it was our view at the time that the paper, although good science and relevant to Sangamo’s platform partner Sigma-Aldrich, was not of any immediate import to drug developers.) That said, the AOP was picked up in a timely fashion by various blogs and press release cut-and-paste services.

Apparently, however, the publication escaped the attention of movers and shakers on the Street until today. There was no blip in price or volume in Sangamo’s stock in mid-August. But on Tuesday, shares rose on the opening and closed up almost 8% on 3x the average volume.

Given the timing of the original AOP, we're not accusing Sangamo of manufacturing or manipulating news. Nor was this a huge movement for a small-cap stock. Surely some trader types would make sophisticated arguments about the need to understand how momentum impels the movement of stocks more than the strength of the underlying news itself. Maybe it was just a handful of traders moving in and out.

But why did it take a company PR to trigger the attention? Aren’t analysts supposed to work hard and dig deep, and that’s why they are paid the big bucks? Or is it that common for the tail to wag the dog? We’re just sayin’.

While You Were Changing the Guard

Oh, hi. Welcome back to the working world. Biiiiiiiiiig stretch. Time to dust the cobwebs off your keyboards and trade tales of BBQ mishaps. All set? Here we go. When's Columbus Day?

Not long after Roche announced a new, post-Genentech-privatization management crew it is shaking things up again. Bill Burns is to step down as head of pharma; he may wind up on the Roche board of directors; and head of diagnostics Jurgen Schwietzer and R&D chief Jonathan Knowles are also hanging it up. As if that weren't enough, short-term Genentech CEO Pascal Soriot is jumping up to COO of pharma and getting replaced by Genentecher Ian Clark as CEO there (Richard Scheller stays put as head of Genentech research and early dev). Jean-Jacques Garaud is also getting a promotion, to head of Roche pharma research and early development, and he and Dan Zabrowski (head of pharma partnering) are getting seats on Roche's enlarged executive committee with Scheller et al.).

There are more changes, and you can get the details at the press release linked above. Also: Bloomberg's take is here, Reuters' is here.

Meanwhile, while you reacquaint yourselves with things like desks and full-sized computers ...

• Roche's soon-to-retire pharma chief Burns went on CNBC over the long-weekend to discuss Tamiflu as part of the Big Pharma's press briefing about the product and swine flu. "We're at a calmer moment," and not in a major pandemic, he said. Feel better, gang?
  
• Pfizer's efforts in oncology as a microcosm of the broader everyone-into-cancer-development trend in pharma: 'profit but little progress' says TheAge/NYTimes.
  
• Scientists in Wales and France ID three new Alzheimer's markers, though none are as predictive as APOE4: MIT's Technology Review's take here.
  
• Robert Reich reviews "The Heart of Power" by Harvard prof/Obama advisor David Blumenthal and Brown prof James A Morone. The book, written prior to Obama's push for reform, examines how various presidents have tackled the idea of universal health care.
• Prasugrel earns a limited recommendation, for high-risk PCI patients only, from the UK's NICE. (h/t pharmagossip)
• Ipsen has licensed to Debiopharm its CDC25 inhibitor, and retained an option to take the cancer drug candidate back after Phase II trials. Hey this strings-attached approach to in-licensing worked OK for Speedel, right?
• Have you taken our poll on the existence of the so-called Drug Lag?
  
• The Phillies are doing their best to keep it interesting, losing four straight in Houston. (Insert "we have a problem" joke here ... Uuuughh.)

image from flickr user kol tregaskes used under a creative commons license.

"Lagging Indicators:" Does Europe Approve Drugs Faster Than The US?

We heard a phrase we haven't heard in a long time this week: "Drug Lag."

Merck EVP Worldwide Regulatory Affairs & Product Safety Peter Honig used the phrase during his introductory remarks to an Institute of Medicine workshop on drug safety, intended as part of a series of updates on IoM's past review of the US Food & Drug Administration's safety regulation.

Drug lag is a term straight out of the 1980s, when the pharmaceutical industry argued that excessive conservatism by FDA meant plenty of lifesaving drugs came to market first in Europe, while US patients suffered or died waiting for the agency to act. We've since seen analyses claiming the whole notion of a "drug lag" was hooey, but that didn't matter: the perception, as Honig noted, was a key motivating factor in helping push through the Prescription Drug User Fee Act, which undeniably led to a rapid increase in the number of new drugs first marketed in the US.

Indeed, a generation of pharmaceutical industry managers grew up in a world where the industry's largest market (the US) was also its fastest growing market, and the one most likely to grant market entry first. Quite a trifecta.

Well, the US is still the largest pharmaceutical market in the world, but it sure isn't the fastest growing. And Honig, at least, thinks it is also showing signs of lagging behind Europe in market entry. The Merck exec didn't press his case hard, but he did prompt a response from FDA's top new drug review manager, John Jenkins (pictured above).

There are really "two issues people are raising" about new drug reviews, Jenkins noted. One is the undeniable fact that there are some delays associated with new processes and procedures, like the Risk Evaluation & Mitigation Strategies or "safety first" initiative. Jenkins acknowledges that FDA has "taken on a huge process burden" and "the money has not followed at the same pace as the new responsibilities." So some "lag" may be inevitable, at least until resources and habits catch up with the new workflow.

But, Jenkins continued, that isn't really what people worry about. They worry about whether "FDA is becoming more conservative."

And that, Jenkins said, is very hard to quantify, because "we have lagging indicators." Economists, he noted, prefer to focus on leading indicators, but the only was to tell what is happening with approvals is to look at statistics for various application cohorts, and the data inevitably trail months or even years behind the calendar.

So "the most recent data we have is from fiscal 2008, and you really can't see any kind of fall-off or change that is dramatic for first cycle approvals of new molecular entities."

But, to Jenkins' credit, he doesn't just drop the issue there. "It is hard to quantify if my division directors or my office directors are affected by the drug safety debate that has been raging in this country for the last five or six years." The issue "has calmed down a bit recently," Jenkins said, but "have they been impacted?" Are "they less likely to approve a drug today with the same data package that they might have been five years ago?"

"It is impossible to make that assessment because you just can't answer those questions," Jenkins says. "What you have to look at is the data over time to see if you see any trends."

Jenkins noted that he presented an analysis of recent drug approvals last year (at, we might add, our very own FDA/CMS Summit for Biopharma Executives in Washington DC). That data showed seven drugs approved in Europe at that time, but not in the US, and only two in the US but not Europe. (Read our coverage here.) But that data is "now close to a year old. We've been looking at it again, but we haven't reported any more recent analyses." (We hope that will change this Dec. 3, when Jenkins opens the fifth annual FDA/CMS Summit.)

But even a clear indication that there are more drugs approved in Europe first may not be persuasive. "There are a handful of drugs approved in Europe that we haven't approved," Jenkins said. "We'd be happy to argue in public why we didn't approve them, but we can't always do that."

One of those drugs, Sanofi Aventis' weight loss agent Accomplia, was ultimately withdrawn in Europe for safety reasons. So, Jenkins said, "Only time will tell: are we being too conservative and depriving patients of needed drugs, or are they being too aggressive and going to run into the same safey buzz saw that we blew through in the 2000 decade."

Time will tell indeed, but we are impatient here, so why don't you all tell us instead: respond to our poll and let us know what you think. Is there a drug lag? And if there is, is it because FDA is too conservative or EMEA is too reckless? Look for the results next week. (If you are reading via email, click here to take the poll.)

DotW: On the Front Burner

It's one of life's great ironies that the minute children head back to school, the mercury soars. It isn't just the temperature that's heating up, however.

The tepid deal-making climate of recent weeks came to a slow boil this week with Dainippon Sumitomo showing the Japanese aren't afraid to pay a bundle to build a presence in the U.S. market (see below). Too bad the seventh largest Japanese drug maker is late to that party--Takeda, Eisai, and Shionogi get bragging rights for being early adopters.

DxS continued to get in on the companion diagnostics action, with a tie-up with Lilly's ImClone division for a diagnostic test for Erbitux. Talk about serial monetization--DxS has partnered with nearly every developer of an EGFR inhibitor, from AstraZeneca to Boehringer Ingelheim to Amgen. Will the company's strategy work? The debate over business models for companion diagnostics rages on...

So, too, does the ongoing debate over health care reform. (It never did get back burnered, did it?)

Congress won't be back in session until next Tuesday but already President Obama is stirring the pot with an address on the hill set for next week. It's likely to be the most important speech of the Prez's career to date--his honeymoon lasted a little bit longer than 100 days, but poll numbers show he's got some work to do, especially on the health care front.

Meantime things are heating up between Biogen and Elan. In a surprise ruling yesterday, Judge Deborah Batts ruled in Biogen's favor, giving Elan just 23 days to sort out some new deal with J&J that doesn't infringe on the two biotech's change-of-control provision for Tysabri. (Note to Elan's CEO Kelly Martin: good luck with that. And fear not, if things don't work out, there's always a nice "no deal of the week" write-up as compensation.)

Like health care reform, swine flu never really got off the front burner either. It may not count as a four letter word (yet)--unless you are Miss Piggy--but if you need a refresher on proper "H1N1 etiquette" Elmo's your guy--er, muppet.

We hope the three day weekend provides a chance to cool down. Until then, here's another edition of

Dainippon Sumitomo/Sepracor: Stop the presses! Another Japanese pharma wakes up to the challenges of selling in its home market and wants to diversify, buying a toe-hold in the U.S. In 2007 Eisai got the ball rolling with its acquistion of MGI Pharma; last year saw the billion dollar deals by Takeda (Millennium) and Shionogi (Sciele). Now it's the turn of Japan's seventh largest drugmaker, Dainippon, which officially announced Sept. 3, it was buying specialty pharmaceutical player Sepracor in a deal worth $2.6 billion. At $23-a-share, Dainippon's cash offer represents a 27.6 percent premium over Sepracor's Sept. 1 closing price of $18.03. The deal gives Dainippon a portfolio of marketed and pipeline medicines, including the sleep aid Lunesta (don't forget the moth!), the asthma medicine Xopenex, and anti-epileptic Stedessa, which is under review at the FDA. Perhaps more importantly, the deal also provides Dainippon with a ready-made commercial group, including 1,200 sales reps and an experienced regulatory team. That's important because the Japanese pharma is in the throes of preparing an NDA filing for its novel schizophrenia drug lurasidone. Phase III data released in August showed lurasidone was significantly more effective than placebo in treating schizophrenia with similar effects on weight and total cholesterol. But the anti-psychotic market is crowded, and positive data alone will not be enough to grab market share, especially come 2011 when Eli Lilly's Zyprexa is scheduled to go generic.

Leo Pharma/Peplin: The privately-held Danish firm Leo Pharma scooped up the Aussie turned U.S. biotech this week in a deal worth about $287.5 million in cash. It's proof yet again that medical dermatology has gotten under the skin of at least some biopharma cos. (Want other proof? Think GSK/Stiefel Labs. On a much smaller scale 10-year-old SkinMedica sold two derm assets this week to Bayer for an undisclosed price) In the case of Peplin, the purchase price, which involves a CHESS Depository Interest (hey, it's still partly Australian), amounts to a 72% premium to the company's Aug. 31 close of A$0.60. Leo is far from a household word stateside, but that doesn't mean it's not bringing home the bacon--a sizzling $1.1 billion in 2008, up 9% from 2007. As part of the transaction, Leo is also providing Peplin with access to credit of up to $24 million until the deal closes. Peplin didn't say what the money would be used for, but it has a substantial - and costly -- development program underway for its late stage actinic keratosis medicine, even as it sits on just $17.6 million in cash and cash equivalents. For the money, Leo gets Peplin's lead product, a gel called PEP005 currently in Phase III clinical trials for treatment of actinic keratosis, a common skin lesion, on both head and non-head extremities. AK lesions can lead to cancer if they are not treated, but current therapies are cumbersome and not effective enough.

Bayer/Algeta: Interest in phase III oncology products continues to bubble too. Bayer fell hook line and sinker for Norwegian cancer therapeutics maker Algeta's radiopharmaceutical Alpharadin this week, inking a deal worth $61 million upfront and $800 million in extra bio-bucks. The German drug maker has agreed to foot the bill for most future development costs of Alpharadin as a treatment for bone metastases from HRPC and other cancer indications.
A formulation of radium 223 chloride, Alpharadin is being tested in men with late-stage, hormone refractory prostate cancer, an indication where the only drug approved is the chemotherapeutic agent docetaxel. Big Pharmas have been keenly interested in therapies for HRPC despite some late stage flame-outs such as satraplatin. Recall Johnson & Johnson snapped up the oral, Phase III abiraterone (CB7630) for advanced prostate cancer via its nearly $1 billion planned acquisition of Cougar Biotechnology earlier in the year. For recent investors in Algeta--the company raised a $37.5 million PIPE earlier in the year with backing from Abingworth--the partnership news provided a quick return, and showed the wisdom of VC investment in public companies. Abingworth and its co-investors got their shares at a 28% discount when they did the deal in February; the stock price has been on a steady climb from 10.90 Kroners ever since, with the company's share price reaching 56 Kroners Sept. 3, the day the Bayer deal was announced.

Roche/PTC Therapeutics: PTC Therapeutics' GEMS technology platform certainly has lived up to its name of late. The privately held biotech announced a new R&D collaboration with Roche on Sept. 2 that could yield nearly $1 billion in milestones over the life of the deal. (In your DOTW two-fer, the biotech also reported that Celgene exercised its option to advance work on a joint oncology discovery project.) As part of the Roche deal, PTC gains $12 million upfront, as well as all important research funding (every little bit helps, we say). In exchange the biotech will use its GEMS (Gene Expression Modulation by Small molecules) technology, designed to yield orally available compounds that modulate post-transciptional control mechanisms, to identify candidates for four central nervous system targets the companies will select jointly. Of course, Roche handsomely threw in some healthy bio-bucks: PTC could earn up to $239 million per target in research, development, regulatory and commercialization milestones, as well as double-digit royalties on sales from any resulting product, under the deal. (Nice, but if that works out PTC will be a Roche subsidiary long before investors see that money.) Meantime, PTC continues to push forward with its Duchenne muscular dystrophy therapy, ataluren. The orally available compound, which is partnered with Genzyme in a deal that leaves PTC with North American commercialization rights, is also being studied as a potential treatment for cystic fibrosis and hemophilia.

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

Order In The Court! New Date for Biogen/Elan Hearing

Partners-turned-adversaries Biogen Idec and Elan Corp. will have their day in court sooner than expected. Yesterday, the presiding judge, Deborah Batts, ordered that the first hearing be moved up a week to tomorrow, Thurs. Sept. 3, at 11:00AM. (Here's a pdf of the court order.)Batts also ordered three of Elan's documents stricken from the record.

Company officials confirmed to IN VIVO the last-minute schedule change but declined to comment either on the cause or on the documents. The stricken documents, which Judge Deborah Batts deemed "extraneous" in her order, are Elan's 25-page "hearing memorandum," a "findings of fact and conclusions of law," and the affadavit of Elan outside counsel Charles Gilman in support of the papers.

The case centers on a major deal Elan cut with Johnson & Johnson and announced in July. Elan is selling J&J 18% of the company, about $1.5 billion, and handing over rights to its Alzheimer's disease programs. But it's also agreed to give J&J the option to finance a buyout of Biogen's rights to multiple sclerosis treatment Tysabri if Biogen is ever subject to a change of control.

Biogen pounced on the financing option deal, saying Elan had made an unauthorized transfer, or "assignment," of rights. It accused Elan of a breach of contract and threatened termination (which would give Biogen full Tysabri rights). Elan countered with a suit asking for a preliminary injunction to prevent termination.

Judge Batts could rule tomorrow on the injunction, on the full breach-of-contract matter, or on neither. - Alex Lash


(Image courtesy of flickrer Diane M. Byrne used with permission through a creative commons license.)

Is it Merck or is it Schmerck?

When is a reverse merger not really a reverse merger? Maybe when Company A, which is acquiring Company B, tries very hard to convince everyone that it really isn't taking over that other company.

In yesterday's announcement about its new management structure, Merck went out of its way to emphasize that "about 40 percent of Schering-Plough's senior leaders will be part of the newly combined company in executive roles." This is an issue, because Merck must convince a lot of people - particularly arbitrators - that it's really not taking over Schering-Plough.

You may recall that, when its $41.1 billion deal was announced last March, Merck insisted Schering-Plough would be the surviving company, even though it would be called Merck. This didn't hold water with Johnson & Johnson, which is Schering-Plough's U.S. partner in selling Remicade, the anti-TNF agent for treating arthritis and, importantly, the recently approved Simponi follow-up drug.

By May, J&J filed for arbitration, arguing that Merck and Schering-Plough are simply trying to avoid triggering a change of control provision that would allow J&J to gain ownership of the drugs. Given Remicade's blockbuster sales - it generated $2.1 billion last year - it's not surprising that J&J would want 100% ownership of a valued product or that Merck and Schering-Plough would work so hard to keep it.

And so this week's announcement appears to be a carefully calibrated attempt to blunt that argument by pointing out that several Schering-Plough execs will be heavily involved in top-tier decision making. These include Raul Kohan, the head of the Intervet Animal Health unit, and Stan Barshay, as head of the Consumer Health business, although his status is listed as interim. For now, though, just two of five primary divisions will be run by Schering-Plough people.

Who else from Schering-Plough's upper stratosphere will survive the process? There's Richard Bowles, who is actually a veteran of both drug makers and will become the newly annointed chief compliance officer. A handful of folks will continue to run various manufacturing operations and report to Willie Dees, Merck's manufacturing czar, while another eight people will run research sites or operations and report to Peter Kim, who oversees Merck's labs.

There was, however, no mention of any role for Fred Hassan, the perennially upbeat Schering-Plough chief executive. Perhaps if Merck's board really wants to make good on its contention that this is a reverse merger, the top job will be handed over. Dick Clark, Merck's chief executive, could finish his career comfortably as chairman. Whether investors would be pleased is another matter. But there's no arguiing that would push the managerial change beyond 40 percent in a very symbolic way.