Follow-On Biologics: Is There a Pathway?

So we knew that the generic drug industry was less than thrilled with the outcome of the follow-on biologics legislative debate, but we didn't realize it was this bad.

That is our conclusion after participating in a webinar hosted by the Washington Legal Foundation on the new biosimilars pathway enacted as part of the health care reform law. (You can watch a replay of the webinar here; and, yes, that is your humble blogger moderating...)

With so much attention focused on the exclusivity issue during the legislative debate, we were excited to have the opportunity at least to start to talk about the nuts-and-bolts of making follow-on biologics happen in the real world.

But boy does it sound like an uphill climb from here. We were struck by the case made by Bob Dormer, a founding partner of the DC law firm Hyman Phelps & McNamara, who argues that--all things considered--sponsors are better off just filing a conventional BLA than bothering with the new "pathway" for biosimilars created by the health care reform law.

Dormer offered the following points:

You can file a BLA at any time (rather than waiting at least four years to file the new, abbreviated BLA--and at least 12 years total for the innovator's data exclusivity to expire before marketing is allowed).

A BLA filing is secret, preserving possible competitive advantages. An ABLA must be disclosed to the innovator.

You can get to court on patent issues quicker, without going through the cumbersome-looking administrative process set up for ABLAs.

The data requirements probably won't be very different--and, for the time being at least, the BLA requirements are more predictable.

Last but not least, you are entitled to 12 years of exclusivity on approval.

Dormer's not the only one who feels this way. As we noted in "The Pink Sheet," Novartis' Sandoz division says it will focus on the BLA route, given the drawbacks it perceives with the new pathway; Teva has also opted to file a BLA for one of its biosimilar projects, and says it may do the same in other cases while it waits and sees what FDA comes up with.

That may be the key point: how will FDA translate the legislation into a regulatory pathway? As the WLF panelists agreed, there are far more questions than answers at this point.

We will of course be covering the details of FOBs implementation. And we will be hosting our own webinar on the theme in June; click here for details.

Image courtesy of flickrer B Tal who notes this piece of ancient wisdom: if we do not change our direction, we are likely to end up where we are headed.

Financings of the Fortnight Checks in on the A-List

Our colleagues at Start-Up do a little thing every year they call The A-List, in which they slice, dice, julienne and slow-cook the year's biopharma and med-tech Series A venture rounds as a way to gauge the health and direction of the industry. If the annual A-List is a three-course meal, consider this post a snack to tide you over.

Four months into 2010, we take a step back and ask: "How are biotechs faring as they try to tap into crucial early-stage funding?"

Not so great, according to Elsevier's verison of the Magic 8-Ball, the Strategic Transactions database. Early-stage biotechs raised $163 million via 15 A rounds through April 30, with the average financing pulling in $10.9 million. (If a deal was tranched -- and many were -- we only count the tranche raised, not previous or future tranches included in the same round. For example, Flexion Therapeutics raised $9 million from Pfizer as part of a much larger A round, but only the Pfizer money was announced this year.)

At this pace, biotechs will raise $652 million in Series A money in 2010. In 2009, the figure was $842 million, and in 2008 it was $709 million. Filter out the massive $145 million A round pulled in last year by Clovis Oncology, and 2009 is still ahead of this year's pace. Paces can change, of course, and last month was one of the busiest for Series As in the past two years.

And that must mean momentum, except that... sigh... it doesn't. So far in May we've seen just one biotech Series A, the low-key Swedish cardiovascular play Cardoz (more on them later).

One trend carrying over from last year is the involvement of corporate venture investors. Last year, about 20% of all venture deals included corporate cash, and 40% of the top-dollar Series As had at least one corporate investor. This year, three deals have had a corporate element. Pfizer leads the Series A corporate pack so far with the aforementioned $9 million funneled into Flexion.

It's early to make grand prognostications on four months worth of data. Still, the numbers are worth monitoring as an indicator of VC health. It boils down to this: Will venture capital rebound to previous norms as the economic wheel turns to the good, or will we emerge from the cave of the global recession squinting at a fundamentally changed landscape in which traditional VC is no longer the dominant source of funding for early-stage R&D? There's a case to be made we've been headed that way for a while, even before the financial crisis. We're curious to see how 2010 eventually fits into the grander of scheme of things. Meanwhile, life goes on, and life requires cash, not to mention long walks, fresh air, and feta cheese. What else can you not live without? How about...

Ikaria & NuPathe: A funny thing happened on the way to this year's IPO window. Ten biotech issues that registered last year have gone public this year, ranging in size from Ironwood’s $203 million take in February to Australia’s CBio, which garnered a tiny $6.2 million. But until the past fortnight, no biopharma had filed an S-1 in 2010 -- how's that for enthusiasm? That is, not until Ikaria, which filed its S-1 on May 13, and NuPathe on May 14. Neither has set terms, though Ikaria used the rather ambitious placeholder of $200 million, while NuPathe went for the more typical $86 million. Haircuts have been the rule not the exception in this year’s IPO market, so don't be surprised if they are extra cautious as their bankers gauge the market. One positive for both companies: their assets are in late-stage clinical trials. Ikaria’s Lucassin is entering Phase III in hepatorenal syndrome, and NuPathe already has advanced its migraine drug, Zelrix, through Phase III and hopes to win approval and launch by 2012. Also of note: Whether Ikaria goes public or not, it will distribute a $130 million dividend to 12 company officials this quarter, payable from a new $250 million loan. Ikaria says the payout is a one-time deal. Prospective investors should also note that Ikaria's top investor New Mountain Partners will continue to run the show post-IPO, controlling as many as three board seats. -- Joseph Haas

Cardoz: After a boffo April for early-stage funding, only one biotech reeled in a Series A round this past fortnight. Spotlight, then, on Cardoz, a low-profile Swedish startup working on repositioned drugs. It doesn't have a Web site, so its investors announced a SEK 100 million round (about US $13 million), which Cardoz will receive in two tranches that aren't tied to milestones, Cardoz CEO Carl-Johan Dalsgaard told IVB. The funding comes from a European syndicate led by Dutch firm Forbion Capital Partners. YSIOS Capital Partners of Spain and Sweden's HealthCap, where Cardoz was incubated and Dalsgaard is a partner, also joined. Its lead compound, the origins of which Dalsgaard declined to reveal, is already in the clinic, and the cash will help push it through Phase II to treat abdominal aortic aneurysms. Cardoz also has a preclinical program to develop novel inhibitors of leukotriene A4 hydrolase. -- A.L.

Sequenom: Look who's back. In April 2009 the diagnostic firm Sequenom admitted employees mishandled data from its Trisomy 21 Down syndrome test, resulting in the dismissal of CEO Harry Stylli, among others, federal investigations, and accusations of insider trading. But new management has recouped enough investor confidence to boost the stock -- if not quell skepticism in other corners -- and raise $51.6 million in a private placement announced on May 12. It was much-needed cash, as Sequenom reported only $30 million in the bank at the end of the first quarter. There's a caveat to the comeback: Sequenom sold the 12.4 million shares at $4.15 each, a 23 percent discount to the previous day's close. On its May 6 earnings call the new management team detailed a clinical development plan using outside data and also, for the first time, clarified that the Trisomy 21 test will be DNA-based (it is now being run on Illumina’s sequencing platform). Whether a Trisomy 21 diagnostic gets to market -- as a laboratory developed test (LDT) by the end of 2011, to be followed by a PMA application for regulatory approval by the end of 2012 -- remains a question, but the company is at last giving details. That, plus the significant discount to its stock price, certainly helped complete the financing. -- Mark Ratner

NeuroTherapeutics Pharma: The B-list needs some attention, too. This Chicago-area startup said May 20 it pulled in a $43 million Series B, notable not just for its size but for its participants, which include corporate funders GlaxoSmithKline and Pfizer. NTP's lead molecule, NTP-2014, has potential applications across numerous diseases, including epilepsy, pain and other CNS indications, according to the company. The drug is still in preclinical development with an IND filing planned for later this year and trials planned in pain and epilepsy. As noted in our intro, corporate funders played an ever-larger venture role last year. We also take note of the presence of GSK's SR One fund. This is the first SR One deal we've heard of since the big re-org, or should we say, the latest big re-org, with ex-Sirtris chief Christoph Westphal taking the reins as he also tries to launch a separate fund that reportedly has cash from GSK. Meanwhile, it's Pfizer's second venture deal this year. NTP officials told "The Pink Sheet" they did not give away any rights, such as right of first refusal or options, in order to secure the financing. NTP chairman Heath Lukatch, a partner at Novo Ventures, said the Series B cash should see the firm through three years and three "robust" Phase IIa trials in pain and epilepsy. -- Jessica Merrill

Photo courtesy of flickr user cheesy42.

FDA Pronounces Rotavirus Vaccine Safe After All: Will FDA Leadership be More Cautious Next Time?

It’s official: FDA has given the all clear to resume use of GlaxoSmithKline’s Rotarix despite evidence of contamination with porcine circovirus. (Read the official announcement here.)

That outcome was something of a foregone conclusion after an advisory committee discussion of the issues last week—and especially after the discovery that Merck’s RotaTeq may be similarly contaminated. After all, it is one thing to suspend use of a vaccine when there is a readily available alternative; it is another to suspend vaccination for a disease altogether. (Read our coverage in “The Pink Sheet” here.)

There are interesting and important implications for manufacturers here, especially as you think about standards for cell-culture based flu vaccines in the future. More generally, any biological product is vulnerable to advances in analytic technology that make possible detection of the previously undetectable.

But we wonder what if any implications this will have on FDA’s newly installed leadership team. We doubt there will be much call to revisit this episode from Congress—as there would have been, if, say, Andrew von Eschenbach were still the commissioner and this were 2007. As you may recall, that was a time when seemingly every decision made by FDA came in for scrutiny on the Hill.

Now, FDA’s leadership has some breathing room: a Democratically controlled Congress has no reason to undercut a Democratically appointed FDA commissioner.

Still, there may be some internal lessons learned that will have implications for how the Hamburg team operates from here on out. There is an old maxim routinely cited by career staff at FDA: “absence of evidence is not evidence of absence.” The leadership team’s response to the circovirus contamination issue appears to be open to some significant second-guessing on that score.

Here is how FDA Commissioner Margaret Hamburg explained the suspension during an address at the Food & Drug Law Institute annual meeting April 22. She cited Rotarix as a classic public health dilemma facing the agency. On the one hand, there was an unexpected contaminant in a vaccine, one that is not known to pose safety risk but still clearly not an acceptable finding. On the other hand, the vaccine is for a disease that is generally mild in the US, but a significant public health threat globally.

Hamburg cited FDA’s actions as an example of “creativity” in applying legal tools in the context of emerging issues where there is no black-and-white answer.

“Our decision was based in part on the fact that an alternative rotavirus vaccine without the extraneous viral material is widely available in this country. But we did not recall the Rotarix vaccine or state that it is unsafe. We also made it clear that other countries could and should make different judgments based on their local assessment of benefit versus risk. Our recommendation was based on an effort to balance science and data with a certain level of uncertainty and also a recognition that this was really the first example of an application of new technologies that allowed us to learn more about a vaccine product.”

Sounds reasonable enough. But read that first part again: “Our decision was based in part on the fact that an alternative rotavirus vaccine without the extraneous viral material is widely available in this country.”

That turns out not to be a “fact” after all, since Merck’s product ultimately showed signs of viral DNA (albeit apparently not the virus itself.) It is one thing to “suspend” use of a product due to an uncertain risk and encourage patients to choose a product free of that risk. But it turns out that FDA, in effect, encouraged doctors and parents to use Merck’s product even though it has a similar risk.

It isn’t just Hamburg who highlighted Rotarix as emblematic of the agency’s new “public health approach to the law.” Chief Counsel Ralph Tyler cited Rotarix as an example of how the Chief Counsel can and should enable FDA’s leadership to meet its public health objective (as we noted here).

Tyler took on New York Times reporter Gardiner Harris, quoting his March 23 article on Rotarix and taking issue with the assertion that FDA’s action “demonstrates that lawyers have lost considerable power at the FDA” since “neither statutes nor agency rules allow the commissioner to ask doctors to pause in their use of a medical product because the agency does not regulate the practice of medicine.”

“This breathtakingly incorrect view of the proper role of the agency’s lawyers is exactly backwards,” Tyler declared. “Contrary to the view expressed by Mr. Harris, empowering a client to act empowers, rather than diminishes, the lawyer.”

“The frequency with which a lawyer says ‘no’ is most assuredly not the measure of a lawyer’s power,” Tyler concluded.

Those remarks were addressed rhetorically to Harris, but the real target was the past approach of the Chief Counsel’s office under the Bush Administration, and most notably under former Chief Counsel Dan Troy. Troy was the first official appointed at FDA during the Bush Presidency, and set a tone of limiting FDA’s actions to those he viewed as soundly based in explicit legal authority. Troy argued that FDA was in danger of losing credibility with the courts, which would potentially eliminate its ability to protect the public health altogether.

Troy, incidentally, happens to be chief counsel for GSK.

So did FDA try a little too hard to find an opportunity to declare a new doctrine for protecting the public health? Should the agency have waited for more data before, in effect, giving the rotavirus vaccine market to Merck?

Those questions are all too easy to answer with the benefit of hindsight. As Hamburg said at FDLI: “We had to operate within shades of gray and I think managed to do so. And the law supported us.”

The real question is whether Hamburg may decide to be more cautious next time …

image from flickr user ~K~ used under a creative commons license

Throwing Biotech Another Tax-Credit Bone

Can Jonathan Cohen do it again? The Maryland diagnostics CEO helped push through his state's biotech tax credit, which has proved popular enough to bring executives to an all-night camp-out in Baltimore two years in a row to grab a piece of the annual $6 million “tax credit-palooza,” as we like to call it.

Now Cohen is part of an effort to win a federal tax credit for investors in biotechs that have received grants from Uncle Sam's Small Business Innovation and Research program.

Wait a second, wasn't there just a biotech tax credit embedded in the health care reform bill? Indeed there was, but the $1 billion tabbed for the Therapeutic Discovery Project Credit will likely be stretched thin, as “The Pink Sheet” reports, even if the IRS sets an individual cap on awards when it issues regulations later this month.

So the recently-hatched Small Biotech Business Coalition, of which Cohen is a member (he's also CEO of diagnostic device firm 20/20 Gene Systems), is working behind the scenes to get the SBIR-related federal tax credit onto the books, and Rep. Chris Van Hollen (D-MD) reportedly is about to introduce a such a bill.

As outlined on the SBBC Web site, the proposal would establish a 25% credit limited to private equity investments in companies that have received SBIR awards and would be limited to one-half of the SBIR grant awarded. For example, a company with a $500,000 Phase II grant could attract up to $1 million in investment, for which the investors would receive $250,000 in income tax credits.

Cohen tells us the federal program would be modeled on state credits available in Maryland, Wisconsin and Virginia and be investor-based, not company-based like the therapeutic discovery credit. Cohen says the state programs have been effective in luring individual and angel investors to back small, local companies.

SBBC claims to be the only organization “focused on increasing the NIH SBIR set-aside beyond the present 2.8%.” Linking the pending Van Hollen proposal to SBIR is crucial, Cohen says. “That way, the federal government has already given some due diligence to the company and the technology. This would be a way to move the technology past where the government funding ends, basically through the valley of death.”

But wait: SBBC wants more. The group is lobbying to increase to 35% the credit for the development of drugs and devices regulated by FDA, “to account for the increased costs, risks and timelines associated with clinical trials.”

No word yet if the 35% plum is baked into the Van Hollen legislation. ­ -- Joseph Haas


Photo courtesy of flickr user EduardoZ.

While You Were Sealing the Deal

For OSI, it turns out that $4 billion is the magic number. Astellas raised its bid for the biotech to $57.50 per share over the weekend and nailed down an endorsement from the OSI board. The market expected a higher bid -- Astellas' winning price (an improvement over its $52/share bid) suggests no white knight had emerged. Still at 55% above the price of OSI shares before the hostile offer in early March, the Tarceva co. didn't come cheap.

Meanwhile, while you were basking in the Game 7 afterglow ...

• Hospital owner Universal Health Services said this morning it would buy Psychiatric Solutions, a mental-health facilities operator, for $33.75/share ($2 billion cash plus assumption of $1.1 billion debt). Reuters story here. The bid tops private equity player Bain.


• Thrombogenics and BioInvent will share a €10 million milestone from Roche as TB-403 begins an imaging study in patients with metastatic, treatment refractory colorectal and ovarian cancers.


• Bloomberg talks to GSK's Abbas Hussain about the Big Pharma's emerging markets surge, and the ongoing land-grab among the industry's biggest players.


• Halozyme blames Baxter for manufacturing snafus on its Hylenex fluid absorption drug. HALO delivered a notice of breach to Baxter, which has 120 days to comply.


• That sound you heard friday night was the epic collapse of the Boston Bruins (or as we prefer to think about it, the epic comeback of the Philadelphia Flyers). Philly got the Eastern Conf finals off to a good start Sunday night, thwacking Les Habs and the suddenly human Jaroslav Halak 6-0.


• Finally -- this blogger is planning to fly to the US on Wednesday. What does that mean? VOLCANIC ASH! Yes, our old friend Eyjafjallajokull is back! Ugh.

image from flickr user Susan NYC used under a creative commons license

DotW: Hard Truths

The feverish networking associated with BIO is but a distant memory this week as biopharma’s deal makers got back to work forging alliances or acquisitions that will provide the necessary substrate for future growth.

That this growth won’t come easily is a given. And the week’s news flow only reinforced the notion, illustrating hard truths about the commercial and regulatory complexities at work in the biopharma industry.

Who among us got bitten by reality? For starters, Takeda’s decision to cut nearly 1600 jobs illustrates the problem many Japanese pharma will be facing as their primary care drugs go generic in the coming years. Investors meanwhile pummelled NicOx, after an FDA advisory committee gave its osteoarthritis medicine naproxinod a thumb’s down. The company is pushing ahead as it awaits an official regulatory decision (the drug’s PDUFA date is July 24). Still it’s hard to believe a partner for the medicine will come anytime soon.

And Merck's quietly announced decision to call off development of MK-2578, its follow-on to Amgen’s erythropoietin stimulating agent Aranesp, showcases how difficult it can be to predict the potential market of a biosimilar. The ESA market has been under considerable pressure for some time as regulators have raised safety concerns about the products, first in the oncology setting, and now more recently in end stage renal disease. (See the May issue of The RPM Report for a Q&A with FDA’s Center for Drug Evaluation and Research Bob Temple for more on the subject.)

It’s a sure bet use of ESAs will go down, not only because of the emerging cardiovascular risks, but also because of the shift toward capitated care in end-stage renal disease that kicks in early next year. Under the new bundling guidelines, there’s pressure on physicians to use ESAs more judiciously, bolstering patients’ anemia via other mechanisms including intravenous iron use. With the commercial viability of ESAs a question, Merck must have run the numbers and determined the amount it would recoup from an Aranesp follow-on (which is expected to be priced at a slight discount to the innovator ESAs but still expensive) didn’t justify the expensive clinical trials it would have to conduct to demonstrate the medicine’s safety.

That big pharmas are wising up to such commercial hurdles ever earlier is a good thing; better to kill a product before you’ve sunk hundreds of millions of dollars into the expensive Phase III. That’s probably cold comfort to the Merck Bioventures group, which has ambitious launch goals for a spate of follow-on products by 2015.

As you contemplate other hard truths (a widening oil spill, the Greek debt crisis, the odds of Great Britain’s coalition government succeeding, the Cavs loss to that Boston team), take a brief respite into transactions land. (Reality may still bite the hand that feeds, but DotW is on its best behavior--for once.) It’s time for another edition of…

Genentech/Evotec: Evotec signed a broad multi-year discovery deal this week with Genentech to identify novel small molecule therapeutics. Further important details, including the financials as well as the therapeutic focus of the alliance, were lacking. Given Genentech’s focus on oncology, and increasingly Alzheimer’s disease and other CNS diseases, presumably Evotec’s technology will be used to develop small molecules in these arenas. Despite the dearth of specifics, the alliance is worth noting for a couple of reasons. First, Evotec’s business model seems to run counter to the collective belief that a biotech’s value is driven not by its technology but from the products derived from its platform. Indeed, as Evotec’s recent deals suggest—in addition to Genentech its signed discovery alliances with Vifor Pharma, Cubist Pharmaceuticals, Active Biotech, and Biogen Idec—management is clearly betting there is more near-term value to be gained from discovering drugs for other companies than in investing in its own pipeline. Second, how the deal proceeds will provide a window into dealmaking at Genentech, which only recently brought on a new head of business development, James Sabry, and continues to forge alliances independent of its Swiss parent. It’s interesting to note that Roche proper is well known to Evotec. The two companies have been collaborating in CNS since 2006, and Evotec is now conducting Phase II trials of EVT101 for treatment resistant depression, with Roche picking up the development costs.—Ellen Foster Licking

Abbott/Zydus Cadila: Abbott’s deal this week with India’s Zydus Cadila is a gift of DotW’s favoring buzz words, including branded generics, established products (a more diplomatic term for generic products), and emerging markets. The news is proof yet again that many big pharmas are following the lead of Sanofi-Aventis and GlaxoSmithKline, which have been the most aggressive in building a commercial presence in “pharmergent” economies such as Brazil, Russia, India and China via branded generics. As part of the recently announced alliance, Abbott will sell 24 Zydus drugs for pain, cancer, cardiovascular disease, respiratory ailments and neurological disorders in 15 emerging markets. Many, though not all, of the licensed drugs will be in complementary therapeutic areas to Abbott's existing branded generics portfolio, which came to the diversified health care giant via its Solvay and Knoll acquisitions. Specific financial terms of the deal were not disclosed, but should the collaboration be a success, Abbott has the option to license more than 40 additional products. In conjunction with the deal, Abbott also announced the creation of a stand-alone established products division with $5 billion in current pharmaceutical sales. The business unit will be led by Michael Warmuth, the former head of Abbott’s diagnostics division. Two years ago, Pfizer set up a similar stand-alone unit as a strategy to cope with flagging US drug sales, especially come 2011 when its cholesterol-lowering medicine Lipitor goes off patent. And that group was also a force at the dealmaking table this week, strengthening its ongoing collaboration with India-based Strides Arcolab (announced earlier this year) via the signing of two licensing and supply agreements. In part one, Strides has agreed to license and supply 38 generic oncology meds to Pfizer in various markets, including the EU, Canada, and Australia. Part two gives Pfizer access to niche sterile injectables for the US market.—Jessica Merrill and EFL

Pfizer/Ergonex: It’s not all about extending the life cycle of established products at Pfizer these days. This week the biggest big pharma’s specialty care business unit inked a deal with Ergonex Pharma for the biotech’s Phase II product terguride, which is in development as a treatment for pulmonary arterial hypertension (PAH). The agreement gives Pfizer world-wide rights (excluding Japan) to the product; in exchange Pfizer will support the ongoing mid-stage clinical trial, taking full control of the compound at the study’s completion. While Pfizer isn’t sharing specific financial details, it will pay Ergonex undisclosed milestones and sales royalties. Terguride, which has an orphan drug designation in the US and the EU, is an oral antagonist antagonist of the 5-HT2B and 5-HT2A serotonin receptors, shutting down signals triggering fibrosis and the narrowing of pulmonary arterial walls that over time results in PAH. The medicine is already approved in Japan for the treatment of hyperprolactinemia.—EFL

Genzyme/Tianjin International Joint Academy of Biotechnology and Medicine (TJAB): Another week, another biopharma looks to ink a discovery deal in China. This week it’s Genzyme’s turn to trumpet a strategic partnership with TJAB, which has an impressive list of co-founders, including China’s Ministry of Science and Technology, its Ministry of Commerce, its Ministry of Health, and the State Food and Drug Administration (China’s equivalent of the US FDA). The partnership was apparently celebrated with the requisite pomp and circumstance, including an official signing ceremony attended by top Chinese officials and senior R&D types from Genzyme. This isn’t the first time Genzyme has traveled east to ink a collaboration. Back in 2007 the biotech signed a deal with Sunway Biotech to develop and commercialize Genzyme’s most advanced gene therapy candidate, Ad2/HIF-1a, which is being tested as a treatment for various forms of peripheral arterial disease. The big biotech is also in the process of building a $100 million R&D center in Beijing, with construction scheduled for completion in 2011. In a small way, the agreement offers the beleaguered Cambridge-based Genzyme an opportunity to shift the news cycle away from the forthcoming annual shareholder meeting and Termeer’s ability to withstand pressures from activist shareholder Carl Icahn who is pushing for his removal.--EFL

Ikaria Execs Don't Need IPO for Big Payout

Two biopharma firms filed to go public Thursday, marking the first drug-company registrations this year. That's rather remarkable considering the biotech IPO window has cracked open a bit.

The more notable of Thursday's filings comes from Ikaria. That New Jersey-based firm is actually two businesses brought together in 2007 by a deep-pocketed syndicate of investors. The first business actually makes the combined company profitable, selling a nitric oxide inhalation therapy for critical-care patients. It's approved for babies, often near-term*, with hypoxic respiratory failure but used in other settings as well. The company earned $13 million last year off of $274 million in revenue.

The 2007 merger that created the company was designed as a bid to create a self-funding drug discovery model while also acting as a magnet for further bolt-on critical care products already in the marketplace.

Thus the second business is drug R&D, on which the company spent $75 million last year, up 10% from 2008. Its lead program, for hepatorenal syndrome, is expected to enter a pivotal Phase III trial this year. But the current program with the most funding is IK-1001, a formulation of hydrogen sulfide that's meant to slow down a severely injured patient's metabolism by triggering a hibernation-like mechanism and give doctors a chance to save tissue that's been cut off from blood supply. It's been tested in three Phase I trials so far, and the lead indication for IK-1001 is to prevent tissue damage from blood supply returning to tissue after a heart attack.

Turns out that Ikaria's 12 executives and directors have fashioned a nice payday for themselves whether the IPO happens or not. According to the S-1, the company will distribute a $130 million dividend to them this quarter, payable from a new $250 million loan. The company insists it's a one-time deal:

"We have not declared or paid any other cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business and, therefore, other than the special cash dividend described above, we do not intend to pay cash dividends to our
stockholders in the foreseeable future."

Curious investors should also know that majority owner New Mountain Partners, a private equity firm in New York whose founder met his wife in a most unusual way, will continue to call the shots after the IPO with as many as three board seats. New Mountain bought 47.5 million shares -- half the company -- at $4.63 as part of the Series B round that helped form the company as it exists today.

* A previous version of this post mistakenly described the approval for pre-term babies. Pre-term babies are not an approved indication for INOMax. IVB regrets the error.

InterMune’s Pirfenidone: No + No = No, After All

InterMune’s roller coaster ride with the idiopathic pulmonary fibrosis therapy pirfenidone took a steep dive back down when FDA issued a “complete response” letter asking for another clinical trial on May 4.

That decision, in one sense, is hardly surprising: FDA already made public the conclusion of its statistical reviewer that the NDA for pirfenidone didn’t meet the definition of “substantial evidence” for efficacy. Slam dunk non-approval.

Except that conclusion was presented to an FDA advisory committee in March for its consideration—with the remarkable outcome that many committee members seemed to agree that the data wasn’t sufficient to meet the “substantial evidence” standard, yet they voted for approval anyway.

It sure looked like a case where FDA was ready to be very flexible in the interest of making a potentially useful drug available for a horrific and untreated disease. One committee member actual voted “no” on the whether there was sufficient proof of efficacy, “no” on whether there was sufficient evidence of safety—and then “yes” on approvability. (Or, as we put it at the time, “No+No=Yes.”)

Apparently “substantial evidence” isn’t as flexible as all that. According to InterMune, FDA says it needs another trial to demonstrate sufficient evidence of efficacy. It may have to be a survival trial, or perhaps a trial with forced vital capacity as an endpoint.

InterMune says it won’t know for sure what will be required to support approval until after it meets with FDA to discuss the complete response letter. Still, the pivotal trial included in the NDA took three years from start to finish; replicating it means a prolonged delay.

So much for a “flexible” standard for substantial evidence, huh?

Maybe not. There is one wildcard in all this: pirfenidone is approved in Japan and marketed there by Shionogi. FDA wanted to review the Japanese trial data, but InterMune provided only summaries; the company didn’t think it would be worthwhile investing the time and resources to make individual case-level data available to the agency.

Our impression of the advisory committee was (and is) that the agency wanted the committee to, in effect, give them permission to approve pirfenidone based on something much less robust than you would expect for, say, a COPD therapy. FDA got that permission.

Still, it isn’t hard to understand why FDA would at least want that data before taking a chance on approving this application.

It may be that the “substantial evidence” standard still turns out to be more flexible than it appears to be—but with the caveat that, no matter how “substantial” it is, FDA expects to see all the data.

image from flickr user RubyJi used under a creative commons license

While You Were Bailing Out Europe

What's €750 billion among friends? Finance ministers across the continent scrambled this weekend to come up with a (just-don't-call-it-a-) bailout to relieve the ongoing and potentially spreading European debt crisis. But in the pharmaceutical corner of the world, it seems hard news was replaced by management profiles.


While you were recovering from BIO ...

• Joe Jiminez talks to the FT about settling in as CEO of Novartis, how he works with Dan Vasella, and cost cutting at Big Pharma.


• The NYT profiles generics giant Teva. The secret to Teva's success? Small offices! (Among other things.)


• Takeda said this morning that it would co-promote Velcade in Japan. Takeda's Millennium subsidiary originally licensed Japanese rights -- along with a host of other geographic rights -- to J&J's Ortho Biotech in 2003.

image from flickr user irene used under a creative commons license.

Deals of the Week Goes Global

This week's post features work from seven writers in five time zones on four continents. Sorry, we haven't quite cracked Antartica. EBI, the record-label-sounding acronym for the combination of Windhover and FDC Reports, is global. Why not IVB too? Just thought we'd get that out there.

So, another year, another BIO. What did we learn this year, besides all kinds of cool facts about Chicago architecture? On Wednesday this blogger chaired a panel of biotech bigshots to discuss how to build shareholder value in this time of financial duress, high-reimbursement hurdles, and risk-sharing partnerships.

The premise of our chat was that although good science and R&D are pre-requisite for building value in biotech, they aren't enough. A company needs an innovative business model as well. We didn't end up with commandments etched on stone tablets, as our panelists agreed that simply imitating what worked for one successful biotech wouldn't necessarily build value elsewhere.

There were, however, plenty of interesting takeaways:

• Anything that steers pipeline toward faster decisions is a good thing. Failure is fine, if you fail quickly and cheaply. Few biotechs, noted Ironwood CEO Peter Hecht, wind up scoring on their first try or with their lead asset.


• Despite the gloomy climate, there has never been a moment in biotech history as now, with so much available capital, experienced management, and promising technology. Not three years ago, not in the 1990s. So said Fate Therapeutics chairman John Mendlein.


• Deal strategies or service businesses designed to boost capital efficiency and slow down burn rates often crimp proprietary development plans. That isn't to say that these "side businesses" aren't more sustainable, but to avoid distraction they ought to be as close to the biotech's core business as possible, noted Venrock general partner Bryan Roberts.


• Going public has its advantages: potential liquidity for long-term investors, access to diverse sources of capital, and so on. But the sudden exposure can be a shock to management teams or companies that have been mainly insulated from dissenting opinions expressed by public investors betting against them, noted John Doyle, CFO of private biotech Achaogen. Doyle knows of what he speaks, as he's helped take two biotechs public and was a Genentech finance VP before the Roche takeover. Encouraging dissent among private company managers and board members can build backbone and help prepare for the IPO culture shock.

Not surprisingly, we spent much of the panel discussing the various deal structures, financing trends and business models that can boost or hamper value creation. Just the sort of discussion you can find here every Friday in...


Onyx Pharmaceuticals/S*Bio: Singapore-based S*BIO and U.S.-based Onyx Pharmaceuticals are expanding their existing development collaboration to include additional indications for S*BIO's novel JAK2 inhibitors, the companies announced May 4. Under the terms of the agreement, Onyx will provide $20 million to broaden the existing development program for S*BIO's Janus kinase inhibitors SB1518 and SB1578, also known as INX 0803 and ONX 0805, respectively.The two companies had inked a development collaboration and license option agreement in December 2008, which was considered one of the biggest biotech deals in Asia, especially for such early-stage compounds. Under the terms of the original agreement, S*BIO received an upfront equity fee of $25 million and is eligible for an additional $525 million in equity, options and license fees. Onyx has the option to develop both compounds or either one separately in the U.S., Europe or Canada. In exchange, S*BIO will receive double-digit royalties and retains rights on the compounds in the rest of the world.T he new contract does not change the terms of the earlier agreement, S*BIO CEO Jan-Anders Karlsson told PharmAsia News May 5, but rather "it adds new activities to what we have agreed. — Tamra Sami

Sanofi-Aventis/Glenmark: Sanofi-Aventis, which has been busy bolstering its diabetes business, this week inked a deal with Indian drug maker Glenmark Pharma to develop and commercialize transient receptor potential vanilloid (TRPV3) antagonist molecules. The Glenmark deal is the first ever research agreement in India by the French drug company. There are only a handful of domestic Indian companies--including Piramal, Biocon, and Cadila Healthcare--with drug discovery expertise solid enough to catch a multi-national’s eye. But Glenmark stands out when it comes to monetizing research assets. The pharma has signed several pacts for new chemical compounds, including earlier deals with Forest Labs in the respiratory space. According to sister publication PharmAsia News, Sanofi Aventis' head of R&D Marc Cluzel was in India in March and the finer contours of the deal with Glenmark were likely finalized then. Not that Sanofi put a ton of money down as part of the alliance; only $20 million of the potential $325 million deal value is up front cash. Sanofi-Aventis and Glenmark have carefully divided the marketing rights for the potential products with the big pharma retaining exclusive marketing rights for North America, the EU, and Japan, and the biotech getting rights in India and certain ROW nations. In what is seen by analysts as a coup for Glenmark, the Indian biotech will have co-promotion rights for any drugs that emerge from the collaboration in the US and five undisclosed Eastern European countries. — Vikas Dandekar

Endo/HealthTronic: Endo Pharmaceuticals has certainly embraced the diversification mantra: On May 5, it announced plans to buy HealthTronic, a provider of urological health services, diagnostics testing services, and devices, for $225 million, plus assumption of $35 million in debt—slightly more HealthTronic's 2009 sales of $185 million. The announcement came less than a week after analysts on Endo's quarterly earnings call pummeled its execs for being too slow to make deals that would reduce its dependence on the painkiller Lidoderm, which represents 50% of sales and which faces patent expiration in 2015. In response, CFO Alan Levin noted, "When we look at opportunities, we certainly have a predisposition for products with on market revenues in order to further diversify our top line." HealthTronic could do just that. For one thing, Endo isn't known for its R&D leadership, and the off-beat move enables it to sidestep direct competition with Big Pharma for pricey, high-quality R&D assets. Furthermore, the company gains additional expertise in urology, an area of interest since its 2009 Indevus buy-out. Endo didn't explain much about its plans to take advantage of HealthTronics' commercial model. Certainly, Endo reps will gain greater access to urologists and have more to talk about with them. And HealthTronic products will benefit from Endo's resources and management skills. Endo projects that HealthTronic will add $80 million to its 2010 revenues, which it now expects will total $1.63 billion to $1.68 billion. Even after the transaction, which Endo is paying for in cash, the company has plenty of cash on hand to pursue more deals. — Wendy Diller

Merck/Ariad: Nearly three years after partnering in a co-development deal for the mTOR inhibitor ridaforolimus, Ariad Pharmaceuticals and Merck revised the terms, giving Merck control of the program and full development and commercialization rights and Ariad a $69 million upfront payment. Even as the climate for biotech financing warms, Ariad’s decision to revise its deal with Merck is telling, showing the sacrifices certain companies must make to fill their coffers near-term. In Ariad’s case, the revisions extend the firm's cash runway into the second half of 2011.They also reduce Ariad's expenses, since the biotech is no longer on the hook for ridaforolimus’ development costs. Ridaforolimus, an oral mammalian target of rapamycin, has the potential to be the first targeted agent for the treatment of sarcoma. It is Merck's only Phase III oncology drug and Merck/Ariad could file an NDA later this year depending on the data in the pivotal trial. Under the revised deal, Ariad stands to gain $514 million if ridaforolimus meets certain regulatory and sales milestones in multiple indications. The original deal called for profit-sharing with Ariad receiving royalties on sales outside the US. The revisions call for Merck to book all sales of the drug and pay Ariad tiered double-digit royalties on global sales. — Jessica Merrill

Valeant Pharmaceuticals/Aton: Valeant Pharmaceuticals announced May 3 that it is shelling out $318 million to acquire Aton Pharma in a move to broaden its non-dermatology US business. But the price tag for Aton--roughly three to four times higher than the acquired company’s annual sales—is steep. For Valeant, the acquisition offers a means to buffer sales that will be lost when its epilepsy drug Diastat (which brings in revenues of about $70 million, or 10% of sales) faces generic competition later this year. In April, Valeant raised $400 million in senior unsecured debt notes, expected to mature in 2020, which "were needed" to acquire Aton – a N.J.-based specialty pharma that focuses on ophthalmology and orphan drugs. But Aton gave no inclination that it was up for sale on April 26, when it announced it was buying U.S. marketing rights to the Parkinson's disease drug Lodosyn from Bristol-Myers Squibb as part of a plan to broaden its niche product portfolio. Aton won’t get the money all at once; the deal includes an up-front payment and earn-outs based "on achievement of development and commercial targets for certain pipeline products still in development" although the two companies declined to disclose further details. In addition, Cerberus Capital Management, the private equity firm that owns Aton, agreed to reinvest a portion of its proceeds from the sale back into pipeline projects, as a partner, Valeant told investors. — Carlene Olsen

Intercell/Cytos: On May 6, Austrian biotech player Intercell announced it was buying Cytos Biotechnology’s monoclonal antibody discovery program for €15 million. In addition to the platform, Intercell’s money buys it certain undisclosed monoclonals in preclinical development and expertise, in the form of Cytos scientists who will join the Austrian firm’s staff. Cytos’s technology is deemed a strategic fit with work ongoing at Intercell, which will use the platform to develop vaccines for Group B Strep and other bacteria. In Cytos’s case, the agreement shows, again, the hard choices struggling biotechs are now forced to make. After receiving disappointing results in the Phase II trials of two of its development candidates—the nicotine vaccine, NIC002, which is partnered with Novartis, and its hypertension vaccine, CYT006-AngQb—Cytos earlier this year slashed headcount from 135 to 85 and announced a restructuring program. As part of those efforts, the Swiss biotech decided to put its monoclonal antibody technology up for sale and prioritize programs partnered with Novartis and Pfizer, as well as in-house discovery efforts related to allergic rhinitis and allergic ashthma. According to Reuters, Vontobel analyst Andrew Weiss called the announcement “excellent news for Cytos” befitting of a “leaner strategy.” — Ellen Licking


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