Who Will Run PhRMA? AZ’s Chip Davis, For Now

The Pharmaceutical Research & Manufacturers of America is buying some time to find a replacement for departing CEO Billy Tauzin. The trade association has named AstraZeneca VP-Corporate & External Relations Chip Davis to serve as “senior operating officer” and—we suspect—as interim CEO in waiting.

Davis is taking a leave of absence from AstraZeneca to join PhRMA “to help with the association’s leadership transition.” For now, that means he will be reporting to Tauzin, who is stepping down as CEO June 30. In other words, Davis’ first job will be to step in for PhRMA’s number two executive, EVP Mimi Simoneaux Kneuer, who will be leaving the trade association in May.

But we expect Davis is really there to buy some time for PhRMA to find a replacement for Tauzin. PhRMA says Davis will stay on “until a replacement for Tauzin is named,” and—since we understand the search for a new CEO is really just beginning—that probably means a period as interim CEO.

Davis is a perfect choice for the job. He has been AZ’s liaison to PhRMA and played a key role in guiding the association’s work on health care reform during the chairmanship of AZ CEO David Brennan. With Davis at the helm, PhRMA should be able to maintain and develop some of the critical alliances that helped the association do so well in the reform debate, particularly its partnerships with organized labor.

Brennan’s term ended in March, but he is chairing the search committee for Tauzin’s replacement.

At the same time, because Davis is so close to Brennan, he is sure to be temporary. Pfizer CEO Jeff Kindler isn't likely to let the past chair--in effect--run the association for his term.

Why the delay in replacing Tauzin permanently?

Well, for one thing, circumstances have changed radically since Tauzin announced his resignation in February, at a time when the prospects for health care reform looked dim. Now, the health care bill is law—and, as we note in The RPM Report—the final bill is essentially a complete tactical victory for PhRMA. In other words, what looked like a potentially crushing setback has become an amazing victory.

There are also strategic reasons for PhRMA to wait a bit on naming a replacement, if only to broaden the pool of candidates. After the flap caused by the negotiations to hire Tauzin while he was still in Congress, for instance, it would be best if PhRMA waits before talking seriously to any sitting members of Congress.

More to the point, it behooves PhRMA to wait and see how the elections go this fall. Best to read the tea leaves (or maybe the Tea Party?) before making the next CEO choice.

One other reason for PhRMA to take its time: the search might take longer than you think. After all, CEO of PhRMA may not exactly be a dream job.

Imagine PhRMA came to you with this offer: "We just scored an across-the-board victory on the biggest piece of domestic policy legislation in a generation, so naturally we didn't want our old CEO to stay. We're sure you can do better. Oh, and by the way, we are going to be slashing our budget pretty radically now that all that health reform stuff is over. And, on top of that, figure on our top 10 members merging into our top 5 in the years to come. When can you start?"

So clearly it is far too early to talk about who will take over PhRMA permanently. There is no short list. But never fear: we won't let that stop us from speculating. Look for our list of names in the next post...

While You Were Stranded

Volcano 1 -- IN VIVO blogger, 0.

Yours truly was supposed to fly to the US on Saturday for a few days of work at EBI HQ Monday-Wednesday. (OK, there were tickets to Sunday's Phillies and Flyers games involved too.)

We've heard from industry friends stranded in Vienna after EASL (looking for your liver doc? He/She's probably still listening to Mozart, drinking strong coffee and eating tiny cakes right about now). There are more serious issues, to be sure. Students stranded. Unattended state funerals. Canceled meetings and conferences. Jobs and families to return to.

The news is full of the result of the ash-cloud disruption. On Sunday the airline industry -- reportedly losing $200 million per day -- started to grumble that imposed flight restrictions were over-zealous or just plain unnecessary. How big is the impact? Well, as of this writing the popularity of the underappreciated 1990 film "Joe vs the Volcano" (as measured by IMDb) is up 70% this week.

Today, we are all Joe. Or perhaps we're all another Tom Hanks character, Viktor Navorski, the unlucky man-without-a-state who gets stuck for ages in an airport Terminal.

Stuck somewhere awful? Somewhere not-so-awful? How did the volcanic ash affect your business plans? (A question we never anticipated asking if there ever was one.) Let us know in the comments.

Meanwhile, while you were living out of a suitcase ...

• Avandia: The WSJ reported on Sunday that FDA is considering putting the brakes on GSK's Avandia v Actos (from Takeda) safety study. Quoth the Journal: "Dr. Hamburg's principal deputy, Joshua Sharfstein, said the decision on the trial "cannot be de-linked from the agency's view of Avandia," suggesting that if the trial must be halted, the agency would also consider asking Glaxo to halt sales of the drug."
• Sandoz: Novartis' generic drug unit is acquiring Oriel Therapeutics, a respiratory-focused biotech backed by New Leaf Venture Partners, Thomas, McNerney & Partners, HealthCare Ventures and CHL Medical Partners. Terms weren't disclosed.
• Elan: the Irish biopharma is exploring a spin-off of its Elan Drug Technologies business, a move that would create two publicly listed companies. Getting deja vu? The company reportedly tried to sell EDT back in 2008.
• H Lundbeck: The H is for 'how do you like them apples?' The Danish CNS company wins a round in court and generic versions of escitalopram will be pulled from its home market.
• AACR: At the conference in Washington, Amgen presented the results of a biomarker analysis of the Phase III pivotal trial for Vectibix. The company explored whether nine particular genetic mutations affected response to the drug. Patients with wild-type KRAS and NRAS genes had significantly improved progression-free survival compared to patients with mutant versions of those genes.
• M&A: Astellas says it isn't going to raise its bid for OSI Pharmaceuticals based on expanded approval for Tarceva, though due diligence is ongoing.
• NHL Playoffs. The game we missed turned out to be a solid effort from the Flyers, who might have won 8-2 were it not for the acrobatics of the NHL's finest-ever goalie, Martin Brodeur. Philly up 2-1 in the series.
  

Deals of the Week: Show Me The Money!

It's been a week of monetary navel gazing, as laggards stateside booted up TurboTax and calculated their contributions to dear Old Uncle Sam and tea partiers condemned America's "gangster government," shouting their own version of "Show me the money." (Got health care with that?)

Apparently Michelle Bachmann and Co. forgot to read the current tax code before villifying it; according to the the Tax Policy Center of the Urban Institute and Brookings Institution, only 53% of U.S. households paid income taxes on their 2009 earnings, with federal taxes for the year dropping by about $173 billion. Who was it who said "A billion here, a billion there, and pretty soon you're talking about real money?" (No, that's not a bio-bucks reference.)

Who else was feeling taxed this week? Besides air traffic control, residents of Iceland and Wisconsin, how about OSI shareholders? Analysts expect Astellas' hostile-turned-friendly negotiations with the biotech will result in an offer closer to $60-a-share even if no white knight emerges. Certainly it doesn't look like a majority of OSI shareholders will tender their shares without a little extra kwan.

Fabry and Gaucher disease patients seem ready to yell "Show me the drug!" The New York Times reports anger among Genzyme's most faithful constituency at the continued shortfall in Cerezyme and Fabrazyme supply. Carl Icahn's blood pressure may be rising as well, given the arrangement Genzyme brokered with that other activist outfit, Relational Investors.

Let's not forget Novartis employees. David Epstein, head of global pharma for Novartis gave his "help me help you" spiel in a letter, announcing the second major reorganization of the US group in less than a year. (We doubt it was an up-at-dawn, pride-swallowing siege, however.)

It's always "show me the money" for biotechs on the prowl for deals and venture firms in fundraising mode. Early-stagers Third Rock Ventures of Boston joins the ranks of VCs on the money trail; SEC documents this week reveal the firm wants to raise $400 million for its second fund. Meanwhile, the NVCA released its first-quarter venture numbers that support what IVB told you last week: it's still a tough go for private biotechs looking for money.

We hope we had you at hello, but even if we didn't, know that IVB will not rest until we have you holding a Coke, wearing your own shoe, playing a Sega game, or until we've bored you to death with '90s movies references. Excuse us while we call our agent, it's time to negotiate another edition of...

Celgene/Agios: Agios won't be uttering the phrase "show me the money" for some time. Rather than tapping its VC backers -- ARCH Venture Parters, Third Rock, and Flagship -- for a Series B or C, the company hitched its fate to Celgene in a deal reminscent of Sanofi's amended tie-up in November 2009 with Regeneron. In exchange for $130 million, which includes what Agios execs called a "modest" equity investment, Celgene has an exclusive option at the end of Phase I to develop any drugs resulting from Agios' cancer metabolism research platform. Celgene can extend the undisclosed exclusivity period if Agios agrees, but it will have to provide additional funding for the privilege. Agios will lead discovery and early translational development for all cancer metabolism programs, while Celgene controls and funds global development and commercialization of any licensed drugs. On each program, Agios could receive up to $120 million in milestones as well as sales royalties. The deal is noteworthy for two reasons: First, it's the largest known alliance value so far this year, and all of the molecules are still preclinical. Second, it's unusual for a private company to ally itself so closely to one partner so early in its life-cycle. Agios' near-term financial future is secure, but now that it's tied to the hip of Celgene, its exit options are far narrower. In other words, if the IPO window doesn't re-open, who will show Agios' investors the money? -- Jessica Merrill and EFL

Teva/Mersana: Teva's new slogan ought to be "We're not just about generics anymore." Further proof of the Israeli giant's expansion into branded drugs comes this week with the firm's April 13 alliance with Mersana, a privately-held biotech developing a novel analog of fumagillin, XMT-1107, for a variety of oncology indications. Bio-bucks for the deal total $334 million, including development, regulatory, and commerical milestones, but the parties did not disclose the upfront for the Phase I-ready compound. Teva gains rights to '1107 in all indications worldwide except for Japan and will take over development costs. Fumagillins, which inhibit angiogenesis by a pathway distinct from VEGF, are a well-studied class of potential cancer molecules that also come with safety concerns (Takeda and Abbott abandoned their programs in the mid-'90s.) Mersana believes its flexible biopolymer conjugate technology solves the toxicity issues. A Phase I trial in all-comers with refractory solid tumors is due to begin later this year. -- Joseph Haas

Roche/Mendingo: Kaching. It's good to be a diabetes device player, especially when pharma companies are on the prowl. Just weeks after Sanofi made a run at becoming an end-to-end diabetes provider, purchasing blood glucose monitor developer Agamatrix, Roche paid $160 million upfront plus $40 million in performance-based earn-outs to take out Mendingo, maker of the Solo micro insulin patch pump. Mendingo already has 510(k) clearance for Solo, but the system is not expected to launch until 2012 because of manufacturing capacity limitations. The device will dovetail with Roche's Accu-Chek blood glucose meter and insulin pump offerings for diabetes management. As David Kliff of Diabetic Investor has noted, pharma companies see an opportunity to provide integrated solutions to the rapidly expanding diabetic population. One segment poised for growth is the patch pump market, which could jump more than 30% in the coming year, especially if the products are approved in Europe. In the US, Solo's main competition comes from Insulet, maker of the Omnipod patch pump. -- Brooke McManus

Hospira/Javelin: When Hospira showed Javelin $141 million this week, Javelin ditched its potential acquirer Myriad Pharmaceuticals in favor of what Javelin management called "a superior proposal." Javelin, which submitted its pain drug Dyloject to the U.S. Food and Drug Administration in December and has an Oct. 3 PDUFA date, has been viewed as an increasingly attractive acquisition target especially since Myriad's bid, also launched in December, was viewed by the Street as "underwhelming." The original deal called for Myriad to acquire Cambridge, MA-based Javelin with stock, and it would end with Javelin stockholders owning 41% of the combined company. Hospira, however, offered $2.20 a share in cash, and it will pay more than $12 million in fees related to the break-up. Myriad has until Friday midnight to respond with a superior offer, but analysts at Leerink viewed its noncomittal response as an indication that a sweeter deal won't be in the offing. For Hospira, the acquisition seems to make strategic sense, further building out its pipeline of specialty injectables. -- EFL

Novartis Reorganizes US Pharma Biz, Replaces CEO

Three months after enacting a global reorganization and more than a year after implementing its new commercial model, Novartis is now reorganizing its US Pharma operations. In an email sent to employees this morning, David Epstein, who heads the global pharma biz, announced that Ludwig Hantson - who has headed the US Pharma unit for the past two years - is leaving and that a replacement will be named before the end of the week. Meanwhile, four new business units are being created; the details are below. And 383 positions are being eliminated, although about 250 individuals will be effected.


Dear Colleagues,

Across Pharma a key objective is to innovate for patients and win in a changing environment. As you are aware, NPC initiated several changes last year through the Customer Centric Initiative (CCI) and Shape the Future Together strategy. Given the importance of our US business, we asked the US leadership team to assess the organization and its structure to continue to compete effectively given the expected changes in our product portfolio over the next several years.

Based on their assessment, the NPC leadership team is making leadership and organizational changes to provide clear competitive advantage and deliver stronger results. These changes support NPC's need to maximize our evolving portfolio, align all functions with our new commercial model, and reduce our cost structure as we reinvest in high-growth opportunities.

In addition, Ludwig Hantson has decided to leave the organization for an external opportunity.

The following changes, effective May 1st, support the goals outlined above: Four New Business Units to Address Portfolio Shift and Growth Opportunities.

We will create four new Business Units to address our changing portfolio and growth opportunities: Primary Care, Multiple Sclerosis, Psychiatry/Neuroscience and Respiratory/Transplant/Infectious Disease.

We are aligning our Primary Care Operating Units (OUs) under one new Head of Primary Care. The Head of the Primary Care Business Unit will also have responsibility for Primary Care Marketing and Patient Services & Mature Products. This should facilitate faster decision-making and more integrated sales and marketing.

We are also reducing from five to four Primary Care OUs to achieve greater balance in the span of control for our General Managers. It will also facilitate governance of our top-line business strategy across the OUs while maintaining focus on our local customers.

Brian Goff, previously responsible for Primary Care Marketing, will lead the Primary Care Business Unit reporting directly to the Head of Pharma North America and President of NPC. Jeff Bailey (Northwest OU), Christopher Kaplan (Northeast OU), Gary Menichini (Southwest OU), Gerry Melillo (Southeast OU) and Cynthia Hogan (Mature Products & Patient Services) will report into Brian and will remain part of the Commercial Executive Committee (CEC).

The former West OU Managing Directors, RDAM and LTC Directors will be re-aligned across the four OUs. We are working with our associates in the West OU office to find alternative positions. Tony Yost will leave the organization. We wish Tony continued success in his career.

Our Primary Care business is critically important and will represent more than half of our sales. We will continue to invest in Primary Care as many of our competitors have shifted their attention elsewhere. This provides us with competitive advantage that we can leverage in the future as we develop primary care medicines in an era of fewer competitors.

In the area of Specialty Medicines, we are replacing our Specialty Medicines OU with three new Business Units: Multiple Sclerosis, Psychiatry/Neuroscience, and Respiratory/Transplant/ID. Each Specialty Business Unit will report directly into the Head of Pharma North America and President of NPC. This ensures dedicated focus on important future growth drivers.

Dagmar Rosa-Bjorkeson, previously responsible for BD&L, will lead the expanded Multiple Sclerosis Business Unit. We will grow our Multiple Sclerosis field force by approximately 160 associates in preparation for the Gilenia launch. Lisa Pilla will be responsible for the Psychiatry/Neuroscience Business Unit. Jesus Leal, who previously led the NPC Transplant and Immunology (IDTI) Business Unit, rejoins the organization to lead the new Respiratory/Transplant/ID Business Unit.

Jayson Dallas has decided to pursue his career outside Novartis. We would like to thank Jayson for his contributions and wish him continued success.

We will combine New Products and BD&L under Carol Lynch, who will report directly into the Head of Pharma North America and President of NPC, enabling further support and focus on portfolio growth.

Align Medical with New Operating Model

Under the leadership of John Orloff, we are taking important steps to appropriately align medical and commercial and to adapt our medical structure to mirror our new operating model. Field Medical will go from five to four OUs. This will allow better alignment on priorities, increase span of control for the Regional Medical Heads, and enhance collaboration among teams. In headquarters, Primary Care and Specialty MS&A groups will realign into four therapeutic Medical Units: Primary Care, Multiple Sclerosis, Psychiatry/Neuroscience and Respiratory/Transplant/ID. These new units will report into Medical and coordinate with our Business Unit Heads to best meet the needs of our customers and patients.

Focus Functions on Growth Drivers While Reducing Cost Structure

To maximize investment in high-impact growth areas, we are implementing a brand prioritization approach that will allocate resources based on the brand's growth potential and lifecycle stage. This means we will elevate support for some brands and reduce support for others. We will ensure that critical patient needs are met but we can no longer sustain the old approach to resourcing. You will be hearing more about this from your functional leaders.

In addition, to further free up resources, we are reducing headcount by 383 positions, mostly in headquarters. We anticipate minimal headcount impact on the commercial sales organization, where we will work to minimize disruption and maintain focus externally on our customers.

As an organization, we have been carefully managing vacancies and instituting other measures to avoid the even more significant cuts we have seen among our competitors. Still, we are making reductions that will impact approximately 250 individuals. These employees will be notified starting today, with most discussions completed by tonight.

Change is difficult especially when it impacts individuals and I want to personally recognize these colleagues for their contributions and commitment. To help with the transition, we are providing significant support, including enhanced severance packages, out-placement services and, as feasible, redeployment opportunities within the Novartis Group.

Ultimately, the changes we are making demand a shift in mindset from doing more with less to prioritizing our focus and resources on areas of our portfolio that will have the greatest impact for patients now and into the future.

I want to thank Ludwig for his contributions to NPC and Novartis, and wish him continued success. We expect to name a new Head of Pharma North America and President of NPC, before the end of the week. Ludwig will be available in the short-term to help with the transition.

Please join me and the General Medicines leadership team for a Town Hall to be held tomorrow, April 15th from 11:15 am – 12:15 pm in the 438 Auditorium. You are also welcome to send questions in advance to the Communications Mailbox.

In closing, I am counting on you to successfully manage the transition and prepare our US organization for future growth driven by an innovative product pipeline that is among the very best in our industry.

David Epstein

Yes+Yes=No? Forest's Daxas and the Pull of Comparative Studies

That wacky Pulmonary-Allergy Drugs Advisory Committee is at it again!

Last month, we noted the remarkable outcome of the review of Intermune’s pirfenidone, where the vote in favor of approval was stronger than the vote that the drug was effective enough to approve—in part because one committee member pulled the nifty trick of voting against efficacy and against safety, but in favor of approval.

The rationale: the drug may not meet the letter of FDA’s definition of substantial evidence, but in a condition as horrible as idiopathic pulmonary fibrosis, evidence of activity is enough to allow approval.

Now, Forest Labs brings it COPD drug Daxas to the same committee and wins a narrow vote that the drug is effective (9-6), a narrow vote that it is safe (9-6)—but a fairly firm vote against a favorable risk-benefit profile (10-5). As we put it in the headline of “The Pink Sheet” DAILY here, the committee said it is safe and effective but not both.

That sounds like a real head-scratcher, though the truth is that the vote is more rational than it looks. In fact, nine committee members voted “no” to either safety or efficacy or both, so it is not surprising that a majority voted against approval. (Trust us: the math works—if you would like a complimentary copy of our analysis of the votes, email us here.)

Of course, there is that one outlier: Richard Honsinger of Los Alamos Medical Center Clinic, who voted yes on safety, yes on efficacy, but no on approvability. His rationale? That while the drug may meet a minimal standard of safe and effective, it should only be approved if it is shown to be better (either more effective or more safe) than alternative therapies prior to approval.

That would obviously be tough for Forest if FDA agrees.

However, we suspect there will ultimately be a different outcome. As we noted in The RPM Report here, Forest made some important changes to the NDA after submission—and FDA basically said it was too late to talk about those before the committee. But we suspect the path forward for Daxas will involve putting brackets around the patient population and applying a robust post-marketing program—which may very well include comparative trials.

Still, let’s hear it for the Pulmonary-Allergy Drugs committee for once again tapping into the important themes of the regulatory process these days.

With pirfenidone, it was a perfect marker for one theme: the way the new regulatory process can make it easier for products to treat unmet medical needs (especially in relatively small patient populations) to reach the market.

With Daxas, the vote is a perfect marker for what happens to products where you cannot find such a population: there will be a strong desire for a de facto superiority standard for approval.

We look forward to the next meeting of this committee—no matter what is on the agenda.

image from flickr user RubyJi used under a creative commons license

Deals of the Week Pines for the Magic Number

Numbers are good. A couple of our favorites are 3 and 0, which happens to be the win-loss record of the San Francisco Giants after their opening series. We also like 59, the number of points Butler University scored against the Duke Blue Devils in Monday's NCAA championship game. Unfortunately Duke scored 61, prompting Butler fans the world over to ask head coach Brad Stevens -- who briefly had a marketing job at Eli Lilly before he joined Butler -- if he still had Prozac or Cymbalta samples to hand out. (If Stevens is fresh out, fans can just go to the Lilly Web site.)

We're thinking somberly of other numbers this morning: 34, the years John Paul Stevens will have served on the Supreme Court after his upcoming retirement, and 4, the number of miners still missing but possibly alive in West Virginia.

Our mind wanders to numbers in the wider world because here in the little sphere of biopharma deal-making, numbers were a wee bit hard to come by this week. Only one of our four chosen deals disclosed figures we could sink our teeth into, and even then it was all biobucks. Bah humbug!

Good thing, then, the deals this week were rich with more important things in life--unmet medical need for old scourges (malaria vaccine and tuberculosis) and cutting-edge science (stem-cell manipulation). We're all antsy to get our weekend started, so it's a-one, and a-two and...



Pfizer/MicuRx/Cumencor: With its April 6 deal with two biotechs to develop novel treatments for multi-drug resistant tuberculosis (MDR-TB), Pfizer not only addresses a critical unmet need in Asia but gains even more of a foothold in a key emerging market. Outside the developed world TB is an enormous problem, resulting in 5,000 deaths a day. China is a hotspot, with more than 25% of all cases of MDR-TB. The deal with US-China hybrid MicuRx and China-based Cumencor calls for Pfizer to provide an upfront payment, preclinical research funding, and downstream milestones linked to a drug’s development and commercialization. Specifics weren't disclosed, but even if the upfront money isn’t huge, it should push molecules well into the clinic since all the development work will be performed in Shanghai. For MicuRx, the agreement validates the biotech’s proprietary antibiotic discovery platform and is the firm's first deal since its $10 million Series A led by Morningside Group in 2007. For Pfizer, the deal highlights its interest in Asia-prevalent diseases, including head and neck cancer. In February, Pfizer signed a precompetitive deal with Lilly and Merck to form the not-for-profit the Asian Cancer Research Group. This week Pfizer highlighted its R&D efforts in Asia and its desire to increase the number of Asia-based clinical trials by 10%.--Ellen Foster Licking

Sanofi-Aventis/CureDM: Sanofi is in-licensing an early-stage compound with potential to restore a diabetic's ability to produce insulin and other pancreatic hormones, the company announced April 8. It is paying up to $335 million, plus sales royalties, to CureDM, a heretofore low-profile six-year-old startup, for global development and commercial rights to the novel human peptide, Pancreate. The firms did not break down the distribution of payments. The deal marks another move by Sanofi to bolster its diabetes business and eventually lessen its reliance on sales of its leading long-acting insulin Lantus and the short-acting insulin Apidra. It comes only a week after the Big Pharma bulked up the drug delivery portion of its leading diabetes franchise by entering into a deal with another small biotech, AgaMatrix, for blood glucose monitors.--Carlene Olsen

Fate Therapeutics/Verio Therapeutics: The San Diego stem-cell firm Fate bought a Canadian startup -- two scientists and their CEO, really -- for an undisclosed amount to bolster its efforts to develop drugs that push adult stem cells into therapeutic behavior. Fate has the small-molecule FT1050 in Phase 1 as a treatment to stimulate a cancer patient's hematopoietic stem cells to replenish after a cord blood transplant. Verio's scientists, based at a research hospital in Ottawa, are investigating protein-based drugs that encourage regeneration of cardiac, pancreatic and skeletal muscle tissues. The therapies could help repair damage due to heart attack, diabetes and muscular dystrophy. Verio CEO Frank Gleeson told "The Pink Sheet" DAILY that of Verio's preclinical compounds, the cardiac program has the clearest path to reaching the clinic. Verio has pulled in $1 million in seed funding; joining Fate lets it hire a few more scientists by year's end, Gleeson said. Fate in November closed a $30 million B round and execs say the cash should last for another year and a half, even with the Verio purchase. In addition to drug development, Fate aims to create a supply of induced pluripotent stem cells that it can license as discovery tools to drug firms.--A.L.

GlaxoSmithKline/Crucell: The two firms said Apr. 6 they would join forces on a next-generation malaria vaccine by combining two existing vaccines, but they'll need outside help to pay for it. Terms weren't disclosed, but the firms will each contribute a vaccine candidate and seek third-party funding for clinical trials. If a Phase I/IIa trial is successful, they will ask for financial help from public or non-profit partners to push into later-stage trials. The deal follows a 2003 agreement GSK and Crucell signed with the Walter Reed Army Institute of Research to test their then-preclinical vaccines both as standalone and combined candidates. Data suggested a combined approach would be more effective. Malaria is the fifth deadliest infectious disease in the world, and second deadliest in Africa. The agreement is the latest in a series of R&D tie-ups by the Dutch vaccine maker, which has benefited from going against industry trends and expanding its R&D footprint. --A.L.

Photo courtesy of flickr user fringley.

Financings of the Fortnight Presents --Ta-Da!--the Financier of the Fortnight

It hasn't financed anyone yet, but when German drug maker Boehringer Ingelheim formally unveiled March 30 its $134 million corporate venture fund BIVF, we knew we had to squeeze it into this week's column. The fund will invest in areas that are not only important to BI's future growth but a heck of a lot of fun to write about: RNA silencing, stem cells, and next generation vaccine, protein, and antibody technologies.

It’s a small piece of good news for early-stage biotechs and their venture backers, who continue to endure one of the worst financing cycles in decades. According to Elsevier’s Strategic Transactions Database, VCs invested just $628 million in biotech start-ups in the first quarter of 2010, down from nearly $1.1 billion invested in the same period a year prior. That’s not surprising; as a whole, the venture industry has struggled to finance itself with 2009 one of the worst years on record and an estimated 50% of the top firms running low on cash.

Drug and device makers have filled the financing void with in-house funds, both expansions of older ones and brand new ones from the likes of Abbott Laboratories and Merck Serono. Now privately-held Boehringer Ingelheim is jumping in. It's concerned that the institutional venture slump will result in a dearth of future drug candidates to license or acquire just as two top sellers, Miraprex/Sifrol (pramipexole) for Parkinson’s disease and restless leg syndrome and Flomax (tamsulin) for benign prostatic hyperplasia, go generic. “We’d been focused on in-house discovery and bolstered those [R&D] efforts with business development. Now it was time to complement with a corporate venture group,” said BIVF director Michel Pairet, a former managing director of BI's pharma R&D group.

Pairet's goal is for the fund to be self-financed and evergreen. His two-person team will report directly to the board of directors because BIVF's goals aren't completely aligned with finance, R&D, or business development. “We’re not financially oriented and we hold a more long-term view,” said Pairet. Boehringer’s six current therapeutic areas of interest are respiratory disease, cardiovascular disease, CNS disorders, virologic disease, oncology, and immunology, and the goal is to invest in companies that will eventually be partners or potential acquisition targets.

BIVF is also most interested in early financing rounds. Pairet anticipates approximately three deals a year over the estimated 10-year life of the fund. BIVF has no hard rules about the amount of capital to invest in any one company; in most cases Pairet expects to put up to $15 million into portfolio start-ups over a series of fund raises. BIVF will also push for board seats, which until recently corporate funds have not traditionally sought.

Why would an early-stage biotech take corporate venture money? Cold hard cash is the main reason, but the ability to tap into a big pharmaceutical company’s scientific wisdom is an allure, as is the value of making close biz-dev connections. Start-ups and their investors continue to rely on acquisition by pharma as the primary exit strategy, but pharma BD shops are swamped by potential sellers. What better way to compete for attention than be open to an investment?

Those cross-currents are good news for Boehringer Ingelheim. With cash at the ready and no prerequisite for options, which can hamstring the ultimate return a start-up gets in an M&A auction, BIVF is sure to be welcomed by both cash-starved biotechs and their venture capitalists. -- Ellen Foster Licking



Achaogen: Antibiotic developer Achaogen completed a $56 million Series C round April 7, adding to more than $100 million in non-dilutive funding it has raised from government agencies and non-profit organizations since its 2004 inception. New investors Frazier Healthcare Ventures and Alta Partners led the round, with participation from existing investors 5 AM Ventures, ARCH Venture Partners, Domain Associates, Venrock Associates, Versant Ventures and Wellcome Trust. The money will help the Calif.-based firm move its lead program, the neoglycoside antibiotic ACHN-490, into Phase II development for complicated urinary tract infections (cUTI). Neoglycosides are next-generation aminoglycosides which Achaogen believes will act against a number of multi-drug resistant gram-negative bacteria, including E. coli, K. pneumonia and P. aeruginosa. In September, Achaogen unveiled Phase I data for ‘490 showing a promising safety profile for the high-dose, once-daily short-course therapy aimed at patients with serious infections. Achaogen's previous venture raise was its $26.5 million Series B in 2006. That year the firm also signed a four-year, $24.7 million contract with the Defense Threat Reduction Agency to develop biothreat therapies, and in 2008 it got $26.6 million over five years from the National Institute of Allergy and Infectious Diseases to develop novel antibiotics, Indeed, Achaogen's ability to pull in significant non-venture money for its development programs is a feat closely watched--and likely soon copied--as biotechs search for models that allow them to stretch their private equity dollars.--Joseph Haas

Somaxon Pharmaceuticals: The specialty pharma completed a $52.8 million FOPO on March 31, selling 6.9 million shares -- 900,000 in the overallotment -- at $8.25. After two complete response letters, Somaxon on Mar. 18 finally received FDA approval of lead candidate Silenor (doxepin) for insomnia, which nearly tripled the firm's share price above the $10 mark before it settled back down to the FOPO price. Somaxon couldn't quite capture all the upside, but it had little choice. It only had $5.2 million cash on hand at the end of 2009, and it last raised funds in July 2009, pulling in a $5.4 million PIPE. It's planning to launch Silenor in the second half of this year but needs a US marketing partner. Somaxon is banking on Silenor's different mechanism of action for a marketing advantage over established sedative-hypnotic sleep meds that have faced harsh warnings from the FDA in the past because of dangerous side effects. Additionally, since Silenor hasn’t shown any high abuse potential, it won’t have to be regulated as a Schedule IV controlled substance, the second such non-regulated insomnia treatment available next to Takeda’s Rozerem (ramelteon). -- Amanda Micklus

Epigenomics: The German molecular diagnostics play Epigenomics placed nearly 14.7 million ordinary shares at €2.25 apiece in a late-March offering to help it build out its commercial infrastructure and launch a novel test for colorectal cancer. Though not officially a PIPE, the stock sale allowed venture capitalist Abingworth to nearly double its stake, which now stands at a shade over 20%. The €33.1 million offering makes Abingworth, which clearly has a taste for what it calls a VIPE -- a venture investment in public equity -- the group’s largest shareholder. The goal, says Epigenomics CFO Oliver Schacht, was to raise sufficient capital to take the company through the next phase of European growth, the launch of its first diagnostic test in the US and potentially into profitability. Epigenomics raised all the cash it could: 50% of its outstanding shares, the maximum allowable. Pre-emption laws to protect shareholders from dilution also meant Epigenomics first had to offer shares to existing holders, including Abingworth. Epigenomics' non-exclusive licensing strategy for the SEPT9 colorectal cancer test is to make it available on multiple platforms. Abbott has licensed non-exclusive global rights to develop a SEPT9 diagnostic for its platform, and Epigenomics own version of the test will likely run on an ABI machine in the US. Soon after previous Abingworth VIPE deals with Algeta ASA and Amarin Pharmaceuticals, the firm's Joe Anderson took a seat on the board. Anderson declined to say if the same would happen with Epigenomics. -- Chris Morrison

Altheos: Just a year after its inception, the San Francisco Bay Area start-up said Apr. 5 it pulled down a nice chunk of change--a $20 million A round led by Bay City Capital. Altheos is not quite as early-stage as it first seems, however. Its lead drug, the Rho-kinase inhibitor ATS907, was in-licensed from Japanese firm Asahi Kasei Pharma and joins a long list of compounds to come to the US from Japan in the briefcase of a biotech scout, VC or executive. Altheos will test the preclinical compound as an eye-drop therapy for glaucoma. There are no current rho-kinase inhibitors on the market for glaucoma, according to Altheos. Certain VCs have long been hip to ophthalmology, but at least in glacoma, much of the interest has been on device approaches to treating this leading cause of blindness. That's because Pfizer’s highly effectively prostaglandin juggernaut Xalatan goes generic in 2011 and to warrant premium pricing new agents will have to outperform a suddenly cheap alternative. Still, rho kinase inhibitors have been commanding attention because of their novel mechanism of action andthe potential to be used in combination with existing prostaglandins. In addition to Bay City, Novo A/S, Canaan Partners, Life Science Angels and Atheneos Capital also invested in Altheos. Bay City's Lester Kaplan becomes chairman; Kaplan was a long-standing executive at Allergan, which has a substantial glaucoma portfolio. -- Alex Lash and Ellen Foster Licking

Photo courtesy of flickr user Magic Lantern Shows.

Comparative Effectiveness Research and Alternative Medicine: Bring it On

The debate over a federal comparative effectiveness research institute in the US was one of the big issues for biopharma companies early in the health care reform debate, and one of the first flash points for hyperbolic, partisan disagreement over the direction of reform. (Before the “death panels,” there was the “rationing” debate.)

Like so much in the final health care reform law, the outcome of CER was pretty much as good as industry could hope: a federal institute relying on a public/private partnership model rather than a federal agency akin to the UK National Institute for Health and Clinical Excellence. (You can read much more on the background of this debate here.)

Still, it is fair to say that the potential impact of CER on biopharma companies makes plenty of people in industry nervous. It is all-too-easy for a pharmaceutical sponsor to imagine a federal study pitting its biggest product against something else head-to-head in a setting where the sponsor has no input or control—and maybe the deck is stacked against the drug to start with.

But is that really how it is going to work out?

After all, love ‘em or hate ‘em, pharmaceuticals at least have mountains of evidence to work with. There is plenty of room to argue about whether a given drug works better than something else, but at least—thanks to those pesky regulators at FDA—you can basically be sure that the drug works for something.

Isn’t it at least possible that CER will focus on determining whether other commonly used therapies meet even that baseline standard?

So rather than thinking of CER as a threat to big pharmaceutical brands, maybe there is an alternative vision for how it might work. Literally: as a tool to test the value of so-called “alternative” medicine.

We were struck by how HHS Secretary Kathleen Sebelius responded to a question during her appearance at the National Press Club April 6. Sebelius was asked about the role of alternative medicine in health care reform—whether things like acupuncture or homeopathic remedies will or should be covered.

Sebelius diplomatically avoided taking a stand on the value of alternative medicine, and stressed that private plans—not the feds—will decide what to cover.

“I anticipate there will be plans offered in the new exchanges, which will give patients a wide variety of choices,” she said. “While there's likely to be a definition of what is a preventive care plan, insurers are likely to compete based on having a more wide range of choices for consumers.”

Fair enough. But then she continued by noting the role for “our comparative effectiveness research.”

“I think our comparative effectiveness research will continue to look at variety of alternatives for expensive care, whether or not earlier interventions, or more homeopathic therapies, or a variety of choices, are ones that really do lead to better health outcomes at a lower cost. And I think those are often consumer choices, and also wise healthcare choices.”

Now, that may sound pretty ominous. There is no doubt that plenty of alternative medicines are “less expensive” than, say, Avastin. And it is certainly possible that a federal center could conclude that acupuncture is in fact more effective than opioids for some forms of chronic back pain, or something like that.

But don’t let Sebelius’ astute political sensibility cloud the issue too much: politicians have learned that you don’t get very far by questioning the value of alternative medicine as a whole.

Government scientists are less reticent when you get specific. Here is what HHS has to say about alternative therapies when it comes to the H1N1 flu pandemic.

"The first and most important step to prevent the flu is to get vaccinated. Vaccination stimulates an immune response using a killed or weakened virus that uses the body’s own defense mechanisms to prevent infection. CDC's current
recommendations to protect against 2009 H1N1 virus do not include natural
remedies as a sole prevention method. If you want to use a natural remedy to
reduce symptoms, CDC recommends that you talk to your healthcare provider about options.

“Alternative medicine should not be used as a replacement for proven conventional care, or to postpone seeing a doctor about a medical problem. The National Institutes of Health (NIH) provides information…on specific alternative options, including scientific information, potential side effects, and cautions for each.

“The Federal Trade Commission (FTC) warns consumers to be cautious about products that claim to prevent, treat, or cure 2009 H1N1 influenza, specifically products like pills, air filtration devices, and cleaning agents can kill or eliminate the virus.

“The U.S. Food and Drug Administration warned consumers to use extreme care when purchasing any products over the Internet that claim to diagnose, prevent, treat or cure the H1N1 influenza virus.”

Those are the types of views likely to emerge in the context of CER run through the new federal center.

The day after Sebelius spoke, a somewhat less politic politician—former Vermont Governor Howard Dean—made similar points during a panel discussion at the DTC Perspectives national conference in Washington. (We'll have more on Dean's presentation in an upcoming post).

Dean, a critic of pharmaceutical DTC, was asked whether he thinks other forms of medical communication should be restricted. Rather than talk about pharmaceutical marketing practices, he talked about alternative medicine, noting his views as a physician and as a governor.

“Medical doctors and chiropractors fight a lot, and as Governor I had to come to terms with that because there are a lot of people who like chiropractors and think that they should be covered,” Dean began. But “there were two chiropractors who were promoting the idea that children shouldn’t be vaccinated. I just went through the roof.”

“I do think that what is good for the goose is good for the gander,” Dean said. He praised the approach taken by Senate Health Committee Chairman Tom Harkin (D-Iowa), who is an advocate for alternative medicine but who sponsored legislation mandating “a fundamental study of alternative medicines with the view that they wanted to cover alternative medicines if they worked, but if they didn’t then they shouldn’t have to cover them.”

“We need to hold alternative health care to the same standards that we hold ‘regular’ medicine or whatever you call us,” Dean said.

Alternative therapies shouldn’t be dismissed just because “we don’t know why they work. We have to be more open minded. Just because we don’t know why something works, doesn’t mean we shouldn’t let people use it.”

“But I don’t think you ought to be able to advertise stuff that is hocus pocus. Whether it is the medical stuff that is hocus pocus or the alternative stuff that is hocus pocus. There ought to be some standard that applies to everybody.”

That is a vision of CER that biopharma companies can get behind.

image by flickr user KayVee.INC used under a creative commons license

Fitting into Fate

Stem-cell startup Fate Therapeutics grew a Canadian arm Thursday with its purchase of Verio Therapeutics, a tiny startup spun out of labs at the Ottawa Hospital Research Institute. We'll have full coverage in the upcoming Pink Sheet DAILY, but first a quick note here that San Diego-based Fate, known in biotech circles for being a very surf's-up kind of place, apparently picked a kindred spirit in Verio's cofounder, Lynn Megeney (pictured).

Not only is he an accomplished stem-cell researcher, he is a funny Canadian, which is about as redundant as "cold Edmonton winter." According to his OHRI Web page, Megeney "remains a proud Nova Scotian, enjoys lifting heavy objects (although he shouldn't), doing silly things (like climbing mountains) and aspires to make biscuits as good as his Grandmother did (a serious scientific challenge)."

Perhaps not coincidentally, one of Megeney's areas of study is the role of stem cells in repairing muscle damage. Until you come up with a regenerative-medicine salve for throwing out your back, Dr. Megeney, In Vivo Blog advises you to lift from the knees. Alas, as of this writing he hasn't called us back to discuss biscuit differentiation and molecular pathways of deliciousness.

Photo courtesy of the Ottawa Hospital Research Institute.

Deals of the Week Keeps Its Friends Close and Its Enemies Closer

Some say that everything you truly need to know in life you learned in kindergarten: take naps, share with others, don't pick your nose in public.

It's also true that most M&A can be described in the language of the high-school homeroom. Those two CEOs are having such a bromance; they totally think they're BFFs! That company's outside counsel was so lame sauce!

And a hostile bid that goes friendly... kind of? Frenemies!

The latest drug-industry frenemies are OSI Pharmaceuticals and Astellas Pharma. Recall Astellas began stalking OSI more than a year ago, informally offering to buy the biotech for $55 to $57 per share. When OSI wanted nothing to do with the Japanese firm, Astellas announced Mar. 1 a hostile $52-per-share bid. Investors thumbed their noses by immediately running the share price to $60, where it mainly has stayed. OSI has been open to a white knight offer, but none has emerged.

Astellas's tender offer was supposed to end yesterday, but the firm said earlier this week it would extend it to April 23. Separately Astellas said it would accept OSI's offer to check out its data room under a confidentiality agreement. Was this the daylight Astellas needed to slide over to OSI in the cafeteria? Ask it to the prom?

Astellas seemed ready to do its part to be, you know, more than friends. It promised that until May 15 it wouldn't pursue its lawsuit against OSI, press forward with its proxy fight to replace OSI's board, or acquire any tendered shares. (Not that there were many to acquire: as of Mar. 30, OSI owners had tendered 38,000 out of about 58 million outstanding shares.)

But as Astellas shakes with one hand, in the other it still grips a blunt instrument -- perhaps a 竹刀, しない? -- with which to deliver the occasional thwack upside the head. The latest blow came Apr. 1, no fooling, in a presentation in which Astellas aggressively defended its $52-per-share offer. It said OSI management has consistently failed to please Wall Street and warned that a rejection of Astellas's bid could send OSI down the same value-destroying path Biogen Idec traveled after it rebuffed Carl Icahn in late 2007.

For good measure -- though our grandmother would have called it chutzpah -- Astellas cited its own failed hostile $1.1 billion bid for CV Therapeutics as proof of its successful negotiating style: "As evidenced by the CV Therapeutics process in 2009, Astellas is a disciplined buyer that understands intrinsic value, and it will not pay beyond that value simply to win an asset."

How convincing is Astellas's argument? Judge for yourself. The entire presentation is here. Of course, this time around Astellas has painted OSI and its lucrative cancer fighter Tarceva as a key to building a top oncology business in five years. Shouldn't Astellas work a little harder on the "friend" part and not so much on the "enemy"? How about brushing up on its German, Italian, French, and Romansch to see how Roche pulled off two hostile deals for Ventana and Genentech?

As for you, dear reader, you have access to our data room anytime of the day... or night. In fact, come on up right now, and have a long look at...


GlaxoSmithKline/Isis: GlaxoSmithKline added to its option-based development portfolio as well as its RNA drug-discovery capabilities with an alliance with Isis Pharmaceuticals, which it unveiled March 31. The firms will apply Isis's antisense platform, which develops compounds that bind to messenger RNA and inhibit the production of disease-causing proteins, to develop new drugs against five targets including infectious diseases and conditions causing blindness. The emphasis will be on orphan drugs, an area where the big pharma has been building its efforts. Isis will receive $35 million upfront to develop the compounds through Phase II proof of concept, at which point GSK will have an option to license and take over development and commercialization. On average, Isis can reap up to $20 million in pre-PoC milestones per program, with total biobucks for the deal running to $1.5 billion. GSK has been making deals in the RNA space for some time. Partners include Sirna Therapeutics before it was bought by Merck & Co., Santaris Pharma and Isis spin-off Regulus Therapeutics. For GSK, option-based deals are nothing new, either, but this is the first for Isis. "GSK gets access to our technology, but in the meantime, we stay in control, moving through drug discovery in a much more expeditious way," Isis CEO Stanley Crooke told "The Pink Sheet" DAILY. Isis expects to move a first drug from the collaboration into clinical development this year. -- Jessica Merrill

MDRNA/Cequent and Ipsen/Dicerna: What is this, RNAi week? The so-called "second generation" of RNA interference companies, trying to maneuver around the patent shadows cast by Alnylam Pharmaceuticals and Merck's Sirna, are cutting deals of their own as the big guys have fallen quiet. Both deals we're highlighting this week relate to an "alternative" RNAi technology based on the Dicer substrate, an enzyme complex that lies "upstream" in the chain of events that lead to gene silencing. Both MDRNA and Dicerna licensed the technology from the City of Hope research center near Los Angeles. But MDRNA, whose CEO Michael French was a top exec at Sirna before the Merck acquisition, is grabbing a second RNAi platform. The suburban Seattle firm once known as Nastech is buying privately held Cequent Pharmaceuticals of Cambridge, Mass. for $46 million in stock, which comes to about 37.4 million shares based on MDRNA's $1.23 share price just before the deal was announced. Cequent's engineered non-pathogenic bacteria both manufacture and deliver RNA molecules into the target cell. MDRNA nabs the platform and an early stage pipeline with a lead candidate soon to enter Phase 1 for the genetic disorder familial adenomatous polyposis. Perhaps more importantly, it also gets cash. It didn't say how much, but it made clear that Cequent's green will fund the combined firms' operations into December. In the second deal, French specialty firm Ipsen is paying an undisclosed amount to Dicerna Pharmaceuticals to build RNAi-peptide conjugates that focus on oncology and endocrinology. Unlike a previous license deal with Kyowa Hakko Kirin, Dicerna keeps a lot more downstream rights but also bears some of the price tag-- a 50/50 split of costs and profits, in fact.--Alex Lash

Sanofi-Aventis/AgaMatrix: Sanofi-Aventis is bolstering its diabetes business through an agreement announced March 31 with privately-held AgaMatrix to co-develop and commercialize blood glucose monitoring devices. The deal follows soon after Sanofi's Feb. 10 year-end earnings call, during which executives said the addition of blood glucose monitors and insulin pumps would give their diabetes business a competitive edge as they cast a wary eye on the market debut of Novo Nordisk's long-acting GLP-1 Victoza (liraglutide). New Hampshire-based AgaMatrix will develop BGMs exclusively for Sanofi using its WaveSense technology, which aims to improve the accuracy of glucose readings. In return, AgaMatrix should benefit from Sanofi's global brands and marketing reach. Sanofi's long-acting insulin Lantus brought in $4.2 billion in sales in 2009, while short-acting insulin Apidra reaped $185 million. Sanofi is AgaMatrix's largest partner to date. Financial terms of the agreement were not disclosed, though AgaMatrix cofounder Sonny Vu told "The Pink Sheet" DAILY the five-year contract does not give Sanofi rights to acquire AgaMatrix or take an equity stake.--Carlene Olsen

Takeda/AMAG Pharmaceuticals: On Thursday April 1, Takeda and AMAG Pharmaceuticals announced the Japanese firm would commercialize ex-U.S. the smaller co's Feraheme, an intravenous iron already approved in the U.S. to treat iron deficiency anemia (IDA) associated with chronic kidney disease (CKD). A deal was not unexpected: AMAG has been saying for months that one of its top goals is to partner rest of the world rights to a company with global reach. Under the agreement's terms, Takeda gets exclusive rights to the iron deficiency anemia drug in five regions, including Europe and Canada. It will pay AMAG $60 million up front and another $220 million tied to downstream milestones for the privilege. Interestingly, AMAG will continue to oversee and pay for ongoing clinical trials of the medicine--even in the territories Takeda licensed. (Phase III trials in the U.S. and Europe to demonstrate Feraheme's utility treating non CKD anemia are due to begin later this year.) The tie-up is logical for both partners. There's no doubt Takeda has global ambitions, and its adding capability in critical areas--i.e. the U.S. and Europe--primarily via the dealmaking table. A commercial stage product that Takeda can sell alongside the synthetic ESA Hematide in-licensed from Affymax makes a lot of strategic sense. Similarly, Takeda's knowledge of the ESA market implies AMAG can have confidence the Japanese firm has the marketing chops necessary to sell the drug in Europe's CKD market. Moreover, Takeda's primary care and oncology focus should stand in AMAG's favor as it tries to move Feraheme into newer markets including the treatment of abnormal uterine bleeding, GI bleeding, and cancer-caused anemia.--Ellen Foster Licking

Photo courtesy of flickr user Tabercil.