The IN VIVO Blog

Biovitrum Creates Rare-Disease Focused Spec Pharma with Swedish Orphan Buy

c.morrison@elsevier.com (Chris Morrison) — Fri, 06 Nov 2009 11:00:01 PST

Sweden’s Biovitrum on November 5 stumped up just over half a billion dollars for compatriot Swedish Orphan, buying itself a tidy additional SEK800 million ($115 million) in revenues, an extended commercial network and a couple of near-term launch opportunities.

The move is yet another step in Biovitrum’s transformation into a specialty pharma company—coming just a week after it offloaded UK-based CNS discovery unit Cambridge Biotechnology Ltd., plus a few other assets, to Proximagen Neuroscience. Originally spun out of Pharmacia as a traditional R&D-focused biotech—albeit a particularly lucky one, cushioned by manufacturing revenues from Wyeth around hemophilia drug ReFacto—Biovitrum announced its turnaround ambitions in 2007.

Back then, newly-appointed CEO Martin Nicklasson, fresh from heading up global marketing at AstraZeneca, declared that the group was scrapping its primary care metabolic diseases pipeline, focusing on specialist programs, building out its commercial operations, and better leveraging its large molecule development and manufacturing expertise.

Few could argue with that strategy back in 2007; even fewer can argue with it now. Investors (those that are still around, anyway) don’t value risky discovery; cash and revenues are king. Europe’s always had a penchant for low-risk, revenue-generating in-licensing focused specialty pharma; the downturn has turned that penchant is a passion and it’s probably gone global.

So Biovitrum’s acquisition of Swedish Orphan “is strategically sound,” declares UK-based NomuraCode analyst Samir Devani, even though he acknowledges it came at “a premium valuation.” Unusually during these days of contingency-based dealmaking, the earn-out component of the deal was negligeable—just SEK 425 million ($61 million), associated with sales ramp-up of one of Orphan’s drugs. Over half the upfront will be paid in cash; Biovitrum plans a rights issue.

Still, a full upfront price-tag was to be expected, given that Swedish Orphan is private-equity owned (42% each by Investor Growth Capital and Priveq) and, with comfortable revenues, didn’t exactly need a fire-sale. What’s more, there was probably more than one suitor, since there aren’t that many niche-disease focused, pan-European commercial companies around. “Who else could they [BioVitrum] have gone after?” asks Devani. The Swedish pairing will help generate the estimated operating synergies of SEK 100 million by 2011 (by cutting head-office costs, for instance) and helps on the cultural front. “The two companies fit like a hand in a glove,” crows Nicklasson in the press release.

Orphan’s key asset is the marketed drug Orfadin, used for a rare fatal metabolic disease called Hereditary Tyrosinemia Type 1. NomuraCode predicts revenue of SEK 300 million this year, but more importantly, growth of 15-20% per annum, at least until patent expiry in 2017 in Europe (and 2013 in the US). Further near-term revenue is expected from the ongoing rollout of Multiferon, a form of interferon-alpha used for malignant melanoma, an intranasal vitamin B12 formulation for pernicious anemia (Nascobal) and from cancer drug Yondelis, approved as second-line treatment for soft-tissue sarcoma and in-licensed from PharmaMar in 2007.

Beyond that, Orphan doesn’t offer much of a pipeline; it’s essentially a commercially-focused organization, wooed for its in-licensing and marketing skills (over 60% of its products are in-licensed). That’s why the deal should be instantly accretive, creating a new group—Swedish Orphan Biovitrum—with Nicklasson at the helm, that generates sales from 60 orphan or niche products, has a handful of late-stage pipeline candidates and which is expected to achieve pro forma revenues of SEK 2 billion in 2009.

By 2015, that figure should have more than doubled to SEK 5 billion, according to management, not least thanks to leveraging Swedish’s European sales and marketing infrastructure to accelerate growth of Biovitrum’s existing drugs.

This won't be Biovitrum's last acquisition. But as the company grows, life will get tougher--as for any spec pharma group. Orphan drugs might not cut the mustard for a larger group--and niche products will be harder to find anyway, given that Big Pharma is also officially now on the hunt.

Maybe SOB will be acquired by a larger suitor, like Zeneus or Celltech before it. Or, even better, maybe it will stumble upon its own Adderall, the ADHD drug that made lucky Shire Pharmaceuticals' fortune.

DotW: Sesame Street

c.morrison@elsevier.com (Chris Morrison) — Fri, 06 Nov 2009 08:20:00 PST

In case you failed to run a Google search this week, you may not have realized that on Tuesday Nov. 10, Sesame Street turns 40. You gotta admit, the show doesn't look a day over five--and that's without Botox.

If you've forgotten how to get to Sesame Street, we have a few reminders--and ear worms-- appropriately tailored for the biopharma industry--hey, it's our version of personalized medicine and it doesn't require a companion diagnostic.

1. Baby We Were Born To Add: For all the CFO types who reported earnings this week--from King, Biovail, Acorda, Facet, Crucell, and dozens of others (25-plus on Thursday alone).

2. It's Not Easy Being Big (er, I mean) Green: In honor of Merck's Dick Clark and Pfizer's Jeff Kindler, of course. And for you Wyeth and Schering types, Kermit offers the definitive explanation on why size matters.

3. Soliloquy on B: For all those biotechs with less than 6 months of cash who are pondering whether 'tis better to--you guessed it--be or not to be.

4. Get Along: Our legislators--Republicans and Democrats not martians and muppets--working to pass a health care reform bill. (GSK and Pfizer execs you can skip this one. The creation of ViiV suggests you've already learned this lesson. We're waiting for the ophthalmology collaboration.)

5. ABC-DEF-GHI: Maybe Big Bird can explain what I. P. O. means to biotech investors. Alimera and Aldagen can only hope.

6. Near and Far: For any biotech exec mulling an acquisition tied to earn-outs. Hint: if you are having trouble seeing the relevance, substitute 'upfront' for 'near' and 'earn-out' for 'far'--or read this amusing rant.

7. Ma Nah Ma Na: Biotech and Big Pharma CEOs who need to change the subject fast when dogged by a reporter. Start singing this, and the press will be crooning "doobie do" along with you.

8. Honker Duckie Dinger Jamboree: Because JP Morgan is only two months away. It's the latest; it's the greatest; it's the only place to be.

9. Just the Way You Are: For Roger Longman, from the IN VIVO Blog Staff.

This week's edition is brought to you courtesy of the letters D, O, T, W, and the number 4.

Roche/Alnylam: Roche’s willingness to pay $331 million up front for access to RNAi pioneer Alylam’s technologies two years ago raised eyebrows because of its price tag and generous (at least for Alnylam) non-exclusivity provisions. Now the companies say they are pleased with their progress and ready to move into the next phase of their relationship: a collaboration to jointly discover and develop specific RNAi compounds for select therapeutic areas, using a shared potpourri of experimental delivery technologies to move the chosen RNAi drugs to their targets. Commercial rights in the US will also be shared, and, ex-US, Alnylam gets royalties and additional milestones. Alnylam has become the poster-child for how to do business development right: although it is an early stage company, its deal-making savvy, expertise in a young and rising field, and IP have enabled it to snare at least three deals with Big Pharma potentially worth billions of dollars. But it's hard to tell whether any more deals like this one with Roche are in Alnylam's future. Most Big Pharma interested in RNAi have already placed their bets and Alnylam's prices are out of reach for nearly all smaller players. Too bad. Looks like there won't be a repeat Deal of the Year for Alnylam this time around.--Wendy Diller

Takeda/Amylin: In recent months, Big Pharma has resisted the urge to gobble up obesity compounds, leaving the market littered with late-stage, unpartnered assets. But on Nov. 1, Takeda announced it was teaming up with Amylin, taking two obesity candidates off the table: pramlintide/metreleptin and davalintide. For Takeda, the deal is an opportunity to build on its heritage in diabetes and metabolic disease, and the price tag shows its desperation. Depending on how the research progresses, the drugs could help fill the holes left by setbacks with the company's DPP-IV inhibitor alogliptin and the genericization of Actos. Under the arrangement, Amylin will receive $75 million upfront and development and sales milestones that could total more than $1 billion. (Near and far, people.) Amylin is also eligible for double-digit royalties on sales. Importantly, Amylin gets someone else to foot what is sure to be a pricey development bill for two drugs that will probably need cardiovascular outcomes studies. Amylin will be responsible for development of potential candidates through Phase II for regulatory approval in the U.S., while Takeda will lead development beyond Phase II in the U.S. and all development outside the U.S.--Jessica Merrill

Biovitrum/Swedish Orphan: Swedish company Biovitrum got in on the deal-making action just one week after unloading its drug discovery unit, Cambridge Biotechnology (CBT) and a number of its own drug development programs to Proximagen Neuroscience. Cuz really who needs drug discovery when you can market a portfolio of 60 orphan/hyper-specialist products? Yep, that's what Biovitrum is buying, having made the decision to plunk $501.59 million down to access Swedish Orphan in a transaction that included a modest earn-out. The move completes Biovitrum's evolution in the specialist direction; Swedish Orphan is one of those new "rare disease players" with two proprietary drugs, Multiferon and Orfadin, along with a diverse in-licensing portfolio of another 50 products. Therapeutic areas include oncology, metabolic disorders, hematology, infectious diseases, urology/nephrology, and emergency medicines. Given Big Pharma's suddenly got religion about playing in the ultraniche disease space--remember GSK's tie-up with Prosensa?--it's interesting to speculate on the deal terms, especially the upfront cash. A competitive bidding process or just PE backers unwilling to accept those terms? The combined company, which will go by the name Swedish Orphan Biovitrum (The name recalls a certain Swedish chef--sorry, wrong group of muppets) forecasts sales of over SEK 5 billion (roughly $716.30 million ) by 2015, with an EBIT margin of over 30% based on its current portfolio and pipeline. Check back with IN VIVO Blog later for a more detailed discussion of the deal.--Ellen Licking

AstraZeneca/Micromet: Your "No deal" deal of the week has been one months in the making. Remember when AstraZeneca/MedImmune opted out of a codevelopment deal for Micromet's blinatumomab, an antibody being studied in hematological cancers. The March deal gave MedImmune the option to reacquire North American commercialization rights if the antibody won FDA approval. At the time, neither company detailed why AZ was exiting the collaboration, but Micromet's CEO Christian Itin speculated the antibody's therapeutic focus on rare malignancies might not be seen as enough of a lucrative opportunity to merit the Big Pharma's attention. (Clearly AZ didn't get the message about ultraniche diseases.) Now the staged divorce is complete (and you thought staged acquisitions were all the rage.) On November 5, Micromet announced it had bought out MedImmune's option on the North American commercialization rights to blinatumomab, bringing an end to a partnership that began in 2003. To regain full rights to its lead program, Bethesda, Md.-based Micromet will pay MedImmune a $6.5 million upfront fee, undisclosed regulatory and strategic milestones and low single-digit royalties on North American sales of blinatumomab should the Phase II mAB reach the market. --Joe Haas

Corporate VCs Star In Financings Of The Fortnight

c.morrison@elsevier.com (Chris Morrison) — Thu, 05 Nov 2009 12:08:05 PST

Oh, venture capitalists. After Dow Jones released its third quarter investment numbers for venture capital two weeks ago, we decided to mine our database to see if all flavors of vc--traditional and strategic--were equally affected. It wasn't terribly surprising to discover that investment from traditional VCs had plummeted--as we noted in our previous post, it's hard to commit money when your pockets are empty.

But to our surprise, investing by strategic groups also dropped in the same period. (You want to know by how much? You'll have to check out the Valuation Watch column in the November START-UP.)

Hang on a minute. Haven't we been arguing for months that corporate venture groups will play a starring role in new company creation, filling the vacuum left by financially struggling traditional players? We have, and we stand by that assesment for the forseeable future--or at least until we see the fourth quarter numbers.

On the one hand, the improving market conditions could make biotechs less willing to accept money from corporate VCs, especially if the funding comes with strings attached. On the other hand, the public markets are still decidedly chilly, suggesting that for the time being, privately-held biotechs will have to hitch their exit aspirations to dreams of lucrative acquisitions by bigger pharma and biotech companies.

But that means finding better ways to capture potential acquirers attention, other than fat sandwich boards that scream "Buy Me!" (If that works, will you let us know?) Certainly one way to forge those ties with pharma is through their corporate venture groups. Perhaps more importantly, even as some limited partners have signaled they are ready to dive back into the risky venture waters, that money is still on the come. Corporates have capital at the ready now, and at least from October's numbers they seem prepared to use it.

Indeed, since October 1, at least eight private biotechs have raised money from corporate venture groups, including three in the past two weels alone. All of which suggests corporate venture's starring role in early stage biotech funding is not yet waning. Still if you doubt us, read on for a round-up of the past two week's financing news.

Probiodrug AG: On November 2, German biotech Probiodrug announced it pulled in more than €36 million ($54 million) through a Series B financing, a pretty significant venture round in the biotech sector, but by no means the largest this year. (Remember Pharmion spawn Clovis Oncology’s $145 million Series A in May and Hyperion Therapeutics’ $60 million Series C round a month later?) Probiodrug’s financing, which was co-led by first-time investors BB Biotech and Edmond de Rothschild Investment Partners also included other new backers Life Sciences Partners and Biogen Idec’s New Ventures. (Corporate Venture!) The German firm is--or maybe was is the better descriptor--widely regarded as an expert in dipeptidyl peptidase (DPP) IV inhibition, a critical mechanism in treating Type II diabetes. In 2000, its work in this area led to an exclusive global licensing deal with Merck, research from which eventually produced the marketed drug Januvia--although not without some bumps, including the failure of the lead compound around which the Merck deal was centered. Four years later Probiodrug got out of DPP R&D altogether via an asset sale worth $35 million to OSI’s Prosidion division. The retrenching set the stage for further evolution. In 2007, the biotech, which had raised $52 million since its initial founding in 1997, merged with drug discovery firm Ingenium Pharmaceuticals in a deal that also included a €20.6 million Series A recapitalization. Probiodrug’s new focus in on inflammatory and CNS disorders, especially the big kahuna, Alzheimer’s disease.—Amanda Micklus

Aldagen: Regenerative cell therapeutics developer Aldagen has revived its plans to go public, filing an S-1 on October 28. Only a day earlier it disclosed in a Form D filing that it sold $7.3 million through the issue of convertible bridge notes—the first fund raise it’s done since bringing in $18.4 million through a Series D in April 2008. Founded in 2000, Aldagen is developing adult stem cells that have high concentrations of aldehyde dehydrogenase, an enzyme that controls the developmental state of progenitor and stem cells. The biotech firm believes these stem cell populations have a greater ability to differentiate into multiple types of cells and tissues. Its lead candidate, ALD101, is used to improve the engraftment period after umbilical cord transplants for inherited metabolic diseases in children. Completion of the pivotal Phase III trial is expected in the first quarter of 2011. As the biotech looks to an NDA filing, it will likely rely on help from the recently formed Alliance for Regenerative Medicine—an effort in Washington to facilitate the regulatory and reimbursement pathway for stem cell drugs. The company says the net proceeds of its IPO, along with cash and cash equivalents (approximately $8.8 million at September 30, 2009) and interest income will sustain operations for two more years. Aldagen is the latest biotech to test the IPO waters after scupppering a previous attempt last year due to market conditions. Earlier this week ophthalmology player Alimera also announced it would try to go public after canceling its first try this past April.—Amanda Micklus

Pulmatrix: Pulmatrix obtained further validation of its technology for developing broad-spectrum anti-infective drugs Nov. 2, bringing in a $30.2 million Series B led by two new investors, ARCH Venture Partners and Novartis Bioventures Fund. (There it is again. The all important corporate venture backing.) The company also won a $2.2 million grant from the National Institutes of Health to advance work on its lead program, PUR003, currently in Phase Ia/IIb studies as a treatment for influenza. Together the two transactions should give the biotech a financial runway for 18 months or more, says CEO Robert Connelly. Of the $30 million in new funding, $7 million covers bridge funding the privately-held biotech has already burned through. Pulmatrix declined to say whether the financing was a step-up round, other than to note “we were happy with the valuation and financing terms.” (Did you expect a different answer?) In addition to completing the flu study, the VC funds will enable Pulmatrix to launch studies of ‘003 in chronic obstructive pulmonary disease and asthma, while the grant money will support ongoing preclinical studies to extend the spectrum and efficacy of the molecule.—Joe Haas

Virdante: Virdante Pharmaceuticals, a new privately-held biotech focused on antibody-based therapeutics for autoimmune and inflammatory disorders, closed an extended Series A financing on Oct. 29, bringing the total raised since January 2008 to $47.75 million. New investors in the round were led by Thomas McNerney & Partners and also included Osage Partners. They join the initial investors in the Cambridge, Mass.-based newco: Clarus Ventures, Venrock, MedImmune Ventures and Biogen Idec New Ventures. (Ooooh! Two strategic investors. Theoretically that boosts the chances of a higher return upon acquisition.) CEO John Ripple said the company’s business model is to develop and commercialize its own proprietary pipeline and “apply our technology to development candidates from a select group of corporate partners.” We’re guessing MedImmune and Biogen Idec will be among that select group, given their investment in the biotech and its Sialic Switch technology, licensed exclusively from Rockefeller University.—Joe Haas

Image by flickrer Herve Boinay used with permission through a creative commons license.

Option-Based Deals are Here to Stay

c.morrison@elsevier.com (Chris Morrison) — Wed, 04 Nov 2009 10:26:24 PST

Or at least, they're not just a short-term symptom of a buyers’ market, according to a panel of experienced option-dealers talking at Bio-Europe in Vienna on Monday.

And no, this wasn’t just Big Pharma wishful thinking; biotech executives were piping the same tune (although granted, that may have been because their new, deep-pocketed partners were within earshot; the need to woo a partner who has taken only an option is, after all, even more urgent than the requirement to sweet-talk a committed licensing partner—at least until that option is exercised). “I certainly think they [option-based deals] are here to stay,” said Nigel Clark, VP Business Development at Vernalis, which signed such a deal with GSK in August.

The point is that Clark and others aren’t necessarily correlating the rise of option-deals with the state of the public markets—although it appears irrefutable, at least to this blogger, that their recent rise has been driven at least in part by the lack of financing or exit alternatives for biotech.

Indeed, our own Roger Longman (well, now only one-fifth our own, but still fully with us in spirit) argued during our recent Pharmaceutical Strategic Alliances conference in New York that any pick-up in public markets (of which there are, still, some positive signs) would likely spell the end of option-based deals and a return to the uncapped investment model (remember that?).

But for Avila Therapeutics’ CEO Katrine Bosley--who signed a deal with Novartis in July--the capital markets aren’t the main factor driving option-based deals (although she acknowledges they will and do influence them). Instead, their rise reflects what she calls a “profound shift” within (some) Big Pharma: a willingness to have less control over partnered programs. This, Bosley continued, is part of the growing “organizational experimentation” among large drug firms.

The assumption is, then, that such a cultural change will be longer-lived than public-market cycles. That assumption could be quite easily challenged. But as Bosley pointed out during corridor-chat after the panel, option-based deals aren’t always good news only for the Big Pharma, in terms of their low cost, limited risk and minimal hassle/resource requirements. They can also be very attractive to biotechs, too.

Granted the biotech has sufficient financial resource (and yes, that’s a big if), it may prefer the full development control that an option-based deal grants it, believing it could advance the program far faster and more efficiently than the Big Pharma. (This is another reason Big Pharma also cites for doing these deals.) The biotech may, in this situation, prefer to shoot for higher downstream rewards—confident that it will achieve the milestones necessary to access them-- and be willing to sacrifice some up-front payment (and certainty). In sum, “the option-structure could still make sense if cheap capital becomes available,” says Bosley. Plus, if the asset is attractive enough, the downside of a non-exercised option is limited since there would likely be plenty of alternative interest anyway.

Roger’s right too, of course: a return of the capital markets will change the nature and number of alternatives available to biotechs, and dealmaking will change—option-based deals as well as regular licensing deals. (Although it’s interesting to note that according to GSK’s Shelagh Wilson, VP & Head of the European arm of their Center of Excellence for External Drug Discovery, which pretty much does nothing but option-based deals, the value of such transactions, in up-front and milestone terms, hasn’t changed much over the last four years.)

But perhaps the biggest influence on the long-term viability of option-based deals will be whether they deliver a sufficient number of well-developed products to Big Pharma—products that can be slotted successfully back into late-stage pipelines and that are worth the money paid to secure them.

It’s too early to count how many of the options within the recent dealmaking glut are exercised. “There are lots of experiments going on; we’ll have to see [in three or four years] what the data say,” Bosley concludes. If option-deals prove to be part of Big Pharma’s solution—and help biotechs build up their companies along the way—they’ll stick around, whatever the capital markets. GSK's Wilson is bullish: “I can’t imagine a return to the pre-option days. I don’t see those coming back,” she asserts.
image by flickrer mollypop used under a creative commons license

Meet ViiV, Pfizer and GSK's HIV Venture

c.morrison@elsevier.com (Chris Morrison) — Mon, 02 Nov 2009 12:41:48 PST

Ed Silverman at "The Pink Sheet" Daily is reporting that GSK and Pfizer will formally announce tomorrow some details about their new(ish) HIV joint venture. Like, for example, the new name. (Any similarity to your favorite games console or Intel processor is purely coincidental we're sure.)

Meet ViiV Healthcare (eventually that URL will probably work). We've previously written about the JV here on the blog (you can read another full, magazine-length piece here), and our take remains largely the same--of course who knows what they'll say tomorrow to throw us for a loop. But here's some of our previous analysis:

The GSK/Pfizer HIV joint venture is an interesting solution to [pharma's problems of scale and funding a competitive pipeline in niche areas]. The new company is relatively small (first year projected sales: $2.4 billion); it’s got its own managers; it makes its own R&D decisions. The research stays within the parent companies and the JV pays its expenses – but if the pipeline projects don’t work out, and the JV doesn’t like what GSK and Pfizer are producing, the JV can buy their research from wherever they want. “It puts pressure and accountability onto the scientists,” GSK’s chief strategy officer David Redfern told us, echoing a favorite theme of GSK’s R&D boss, Moncef Slaoui.

Stay tuned. Maybe ViiV is about to make its first deal? We'll keep you posted.

You Can Be A Star!

c.morrison@elsevier.com (Chris Morrison) — Mon, 02 Nov 2009 06:00:15 PST

We at the IN VIVO Blog know this is a tough time for plenty of folks in biopharma companies (almost as bad as it is in journalism) and we always try to do what we can to help people who are between jobs. So, when the following casting call came across our desks, we figured we should open it up to as many possible candidates as possible.

Here is it is:

[AGENCY NAME] is seeking talent for a NATIONAL SAG commercial for LIPITOR. We are seeking the following types of talent. Actors and non-actors are welcome to apply:
· Males who are 50-65 years of age
· ALL ethnicities
· Currently taking LIPITOR for at least 6 months
· You do NOT have to have had a heart attack/cardiovascular event
· We are only looking for NEW talent that have not already auditioned for this project in any market/with any other casting company (your tape is already on file).

If you would like to be considered, please send an email with your headshot/snapshot.

No Phone Calls Please. Thank you.

If you think you meet the criteria, drop us a line and we'll provide you the contact details--though we MAY ask you to write up your experience too ... and we don't pay as well as Pfizer...

While You Were Running

c.morrison@elsevier.com (Chris Morrison) — Mon, 02 Nov 2009 02:13:34 PST

It was mostly liver most of the time this weekend, and so your weekend roundup will comply with a few highlights out of AASLD. But there was much, much more. And yes, there was baseball, but we don't want to talk about that right now. Also congrats to you marathon runners.

OK let's do that thing where we tell you what happened this weekend. While you were dealing with children high on Halloween candy ...

HCV: You've seen the $70mm milestone, now see the full Phase Ib data behind BMS and Zymogenetics' decision to move forward.
HCV: Does Vertex's telaprevir work well when given only twice a day? Yes. Yes it does. See also this story from "The Pink Sheet" posted over the weekend.
HCV: Yes but what about Schering-Plough's boceprevir? Does additional data from Sprint-1 look good? Yes. Yes it does.
HCR: What does Jeff Kindler think about the chances for health care reform? Read the FT interview.
Alzheimer's: Private German biotech Probiodrug rakes in more than $54 million to back its glutaminyl cyclase inhibitors. Funds raised from new backers BB Biotech, and Edmond de Rothschild, Life Science Partners, and Biogen Idec, plus A rounders IBG, TVM, HBM, and CFH.
C. Diff Infection: Additional Phase III data on Optimer's fidaxomicin wows 'em at IDSA.
Obesity: Takeda and Amylin team up on obesity compounds--$75 million up-front secures them a spot in this week's DOTW.
Lupus: GSK and HGSI keep the Benlysta train rolling with positive Phase III data from a second pivotal study.
Lidge'd: We said we didn't want to talk about it, OK? Sheeesh.

image from flickr user t_a_i_s //creative commons.

Deals of the Week: Trick or Treat!

c.morrison@elsevier.com (Chris Morrison) — Fri, 30 Oct 2009 12:35:50 PDT

(Top row, L-R: Wyeth, Genentech, Schering-Plough;
Middle: Sepracor, CV Therapeutics, NitroMed;
Bottom: ImClone, Alpharma, Barr Labs)

Knock knock! Can a ghost biopharma get some friggin' candy here?

Terribly sorry, didn't mean to frighten you. We weren't sure whether ghosts--scary or otherwise--fit into what's acceptable Halloween attire. It's so hard to tell these days. A helpful guide reprinted in today's NYT from a California school:

A memo about costume appropriateness sent home recently by Riverside Drive’s principal made the following points:
¶They should not depict gangs or horror characters, or be scary.
¶Masks are allowed only during the parade.
¶Costumes may not demean any race, religion, nationality, handicapped condition or gender.
¶No fake fingernails.
¶No weapons, even fake ones.
¶Shoes must be worn.

Oh California, how you've come a long way since that Halloween scene in ET. Presumably anything financial-crisis, VC fundraising, or swine related is also off limits. Not to mention any member of the Congressional 'gangs' (sorry kids, no Chuck Grassley or Olympia Snowe costumes this year! Inexplicably still OK? Joe Lieberman). Also, Cliff Lee costumes have been banned in NY.

Here's wishing you some fun trick-or-treating this weekend. The deals below don't carry weapons and always wear their shoes, and win IVB's weekly costume contest, for they are ...

Sanofi-Aventis/Micromet: Sanofi is paying $12 million up-front to take a bite of Micromet's BiTE technology platform. The two companies' discovery deal sees Micromet going after an antigen on the surface of carcinoma cells and shepherding the discovery program through Phase I clinical development, where Sanofi takes over. Development and regulatory milestons could total $241 million for Micromet, which can earn further milestones and royalties on world wide product sales. The biotech's platform--bi-specific T-cell engagers--recruits the body's T-cells to recognize and kill tumor cells potently and consistently. Sanofi joins Micromet BiTE partners Bayer Schering, Merck-Serono and MedImmune.--CM

PPD/Unnamed Spinout: Contract research organization PPD announced plans Oct. 27 to split into two companies. The CRO business will remain as the parent company, and PPD's compound partnering unit--which takes risks more typically associated with a drug development business--will spin-out into an as-yet unnamed separate public company. The new firm, to be established by mid-2010, will start with a $100 million financial stake from PPD and the portfolio of assets it already has acquired. In the meantime, it’s business as usual for the unit, PPD CEO David Grange said, and the sitll-intact company anticipates acquiring two more compounds before the end of '09. While no CEO or head of business development has been named yet for the newco, which will employ a core group of PPD personnel. The assets that the spinout will take with it from PPD include royalty rights and sales-based milestones for Janssen-Cilag’s Priligy, a treatment for premature ejaculation that has been approved in five EU nations plus Mexico and South Korea; rights to regulatory and sales-based milestones plus royalties to Takeda’s experimental diabetes drug alogliptin; a dermatology program acquired in the purchase of Magen BioSciences this past April; and a experimental statin licensed from Ranbaxy Laboratories. Read our extended take--along with a discussion of PPD's other announcements this week including a $100 million investment in Celtic ~~Pharma~~ Therapeutics--in "The Pink Sheet" Daily.--Joseph Haas

Cephalon/BioAssets Development Corp.: Though an acquisition is not definite yet, on Oct. 26 Cephalon announced that it doled out $30 million upfront for the option to buy the privately held biotech BioAssets Development Corp. The acquisition depends entirely on the outcome of BioAssets' ongoing Phase II trial of etanercept (Enbrel) for sciatic pain, due next year. That study should help Cephalon gauge the potential for its own anti-TNF (CEP-37247) in sciatic pain, Cephalon Chief Financial Officer and Executive VP Kevin Buchi said in an interview, and buying BioAssets would give the specialty pharma the necessary IP around using anti-TNFs in that indication. Exercising the option would provide BioAssets backers with additional undisclosed cash and the potential to earn development, regulatory and sales milestone payments. --Carlene Olsen

GSK/SuperGen: GlaxoSmithKline added to its option-based alliance total this week, signing a deal with oncology specialist SuperGen to discover and develop cancer drugs based on epigenetic targets. The arrangement is GSK’s sixth option-alliance so far this year, though far from the largest in terms of upfront cash. Under the terms of the five-year deal, GSK will pay SuperGen $5 million upfront, including a $3 million common stock investment, plus up to $375 million in development and commercial milestones. SuperGen is also eligible for tiered royalties into the double-digits based on net sales of any drugs resulting from the collaboration. SuperGen says its okay with an option deal for the program, given that it is one the company already had up and running, and the investment offers a chance to keep the research moving forward. The Dublin, Calif.-based company has been studying epigenetics for a decade, since acquiring decitabine – the drug that eventually became Dacogen – in 1999. --Jessica Merrill

Medivation/Astellas: Medivation has been here before and apparently likes the terrain. In a deal similar to last year’s partnership with Pfizer on Dimebon, Medivation will receive $110 million up front to collaborate with Astellas Pharma on the development and commercialization of Phase III prostate cancer candidate MDV3100. Like the September 2008 deal in which Medivation partnered its Alzheimer’s disease candidate, the Astellas deal for MDV3100 includes significant bio bucks and gives Medivation the option to co-promote the drug in the US. Medivation could earn up $335 million in development and regulatory milestones, along with up to $320 million in commercial milestones. The companies will share US development and commercialization costs, as well as profits, equally, with Astellas responsible for full development and commercialization costs outside the US. Medivation will receive tiered double-digit royalties on ex-U.S. sales of the drug. In an investor call Oct. 27, Medivation CEO David Hung said the deal’s structure will further “our strategic goal of becoming a fully integrated U.S. specialty pharmaceutical company while retaining significant economic participation in MDV3100’s ultimate commercial success.” Medivation chose Astellas because of its global experience marketing urology drugs such as Flomax and Vesicare. ‘3100 is currently being studied in late-stage, castration-resistant prostate cancer patients who did not respond or no longer respond to therapy with docetaxel. Down the road, the two companies hope to expand the drug’s label to earlier-stage prostate cancer.—JH

image from flickr user peasap used under a creative commons license

Hard Time For Biopharma CEOs (Part 2)

c.morrison@elsevier.com (Chris Morrison) — Thu, 29 Oct 2009 13:18:17 PDT

The indictment of former Stryker Biotech President Mark Philip should hammer home a message that the Food & Drug Administration and other federal health care enforcement authorities have been delivering for at least two years: senior management at FDA regulated companies can and will be held criminally liable for marketing practices that run afoul of regulators.

Before today, that message has been (mostly) words. Prosecutions of executives have been rare, and when they do occur they tend to focus on individual sales reps and their direct managers, rather than reaching into the C-suite.

There have been exceptions. Former Intermune CEO Scott Harkonen is facing jail time after being convicted of wire fraud in a case involving claims that the company inappropriately promoted Actimmune via a press release. For Big Pharma CEOs, though, it is easy enough to dismiss that precedent, since Harkonen was personally involved in the activities at issue in the case—a small biotech CEO necessarily leaves more fingerprints, as it were.

Then there is the case of several top Purdue executives, who paid criminal fines as part of a settlement of an investigation into the promotion Oxycontin. That prosecution involved the application of the so-called Park Doctrine, named for a Supreme Court ruling which allows the government to hold top executives accountable for violations of the Food Drug & Cosmetic Act even if they were personally unaware of the violation. That is, the law makes it a crime to introduce misbranded or tainted products into commerce—and a CEO can be guilty of that crime even if he or she had no knowledge that someone somewhere in the company was doing that. (We discussed the implications of that prosecution in The RPM Report; click here.)

Still, the Purdue case was a bit of an outlier, a prosecution motivated by concerns about abuse of Oxycontin in some rural communities, rather than by the more common themes of recent industry marketing cases. It was a classic war-on-drugs case—not part of the war on the drug industry and its marketing practices.

Much more common has been what happened in the recent Pfizer settlement. The case included a record-setting fine ($2.3 billion) and lots of tough talk about holding individuals responsible. But the prosecution in that case focused on only one sales manager, who was convicted for her actions in promoting Bextra. For Pfizer’s senior management, the settlement means another corporate integrity agreement—but not direct accountability in the form of criminal charges.

At least so far.

But one wonders how long that pattern will continue. It is worth noting that the Pfizer settlement was negotiated before Inauguration Day—that is, before the new Administration had a chance to decide what if any changes it wants to make in approaching health care fraud prosecutions.

The Stryker case does not by itself answer that question. This investigation also began in the prior administration, and the charges (against the company and several sales executives in addition to Philip) focus on explicit acts, not the broader notion of executive liability inherent in Park. Specific counts include wire fraud and conspiracy, as well as overt acts of introducing misbranded or tainted products to the market—all based on what the government claims was a deliberate campaign to market bone morphogenic protein beyond the limits allowed by its humanitarian device exemption approval by FDA.

We have no idea whether those allegations are true, of course. But we also know this: Philip is no longer the President of Stryker Biotech, and he is no longer free to travel.

Philip “self-surrendered yesterday and appeared in court,” the US Attorney’s Office told us. “He was released on standard conditions and surrendered his British passport. His arraignment is set for tomorrow (Friday) at 2:00 p.m. in front of Chief Magistrate Judge Judith Dein.”

We’re betting Philip won’t be the only top executive to find himself standing before a judge as the Justice Department works though its backlog of marketing cases.

California More Generous Than Expected With Stem-Cell Money

c.morrison@elsevier.com (Chris Morrison) — Thu, 29 Oct 2009 12:29:29 PDT

CIRM, the California agency in charge of research and development funding of stem-cell related work, is awarding $225 million to 14 preclinical projects, it said this morning. That's nearly $60 million more than its scientific reviewers recommended.

We reported yesterday that CIRM would hand out at least $166 million in "Valley of Death" funding unless its governing board added projects to the approved list at the last minute, and that's exactly what happened Wednesday morning.

The agency's international partners are also kicking in funding, bringing the total to more than $250 million, a huge injection of cash for stem-cell related projects that the funders hope can reach clinical trials within four years. The money will mainly go to eight California-based groups: seven non-profit institutions and one private firm, Novocell.

Reviewers at the agency originally recommended 11 projects and $166 million in funding, but the 29-member CIRM board voted to add three more projects that didn't make the original cut, including one led by Stanford University researcher and stem-cell pioneer Irving Weismann that aims to create anti-CD47 monoclonal antibodies to target leukemia stem cells. (You can read the reviewers' concerns about the project in the report linked above.)

The only for-profit group to lead an award-winning team is Novocell in San Diego. They propose a method of implanting specially-encapsulated beta cells grown from embryonic stem cells to treat type-1 diabetes. Because Novocell is the lead investigator, the cash is structured as a loan, not a grant. Of the $20 million, all but $2.8 million will go to Novocell, CEO John West told In Vivo Blog. West also says the cash infusion from "the stem-cell experts" was a validation of the firm's work and puts it in a "good position" to look for its next round of venture funding.

There are some minor details to work out first, though. West says Novocell hasn't yet received a loan document from CIRM and isn't exactly sure about the terms. Based on the loan program's guidelines, West is aiming for 10% warrant coverage and a payback period closer to 10 years, the far end of the range. "We have a good feeling we'll work it out," said West.

CIRM loans will certainly have more generous terms than typical bank loans, and the agency has said it doesn't expect many of them to be paid back. West said he was surprised that Novocell was the only for-profit to lead a disease team application. But he noted that not many of the state's stem-cell related firms were far enough along to push a program into the clinic within four years, one of the top criteria of the agency's reviewers.

Of the $20 million, $2.8 million will go to co-investigator Jeffrey Bluestone at the University of California, San Francisco. CIRM reviewers were optimistic the project could meet the goal of getting to clinic within four years: "These elements make a successful IND filing to treat diabetes likely and led to a strong recommendation for funding."

CIRM officials originally hoped for more loans in this first disease-team funding round. The agency has spent two years building a $500 million loan pool targeted at for-profits. That program, the brainchild of CIRM chairman Bob Klein, is still in place, but it won't quickly help fill the venture funding void. A second round of funding for translational projects is slated for next year.

Photo courtesy of flickr user Peter Ito.

Effient and Onglyza Start Slow—And That May Not Be A Bad Thing

c.morrison@elsevier.com (Chris Morrison) — Mon, 26 Oct 2009 07:33:34 PDT

When Big Pharma execs start pointing to unusual performance metrics when talking about big product launches, investors get very nervous.

What they want to hear (or, better yet, see for themselves) is simple: clear evidence that new prescription trends are tracking well relative to blockbuster launches of the past. After all, as the prescription data company IMS Health points out, it does seem to be an ironclad rule that rapid initial uptake leads to blockbuster franchises—and slow starts almost never do.

So when Lilly and Bristol-Myers Squibb spent their quarterly earnings calls talking about hospital P&T committee schedules, formulary status, brand awareness levels and “intention to prescribe,” you can see why investors are nervous about the prospects for two of the biggest launches in the industry: Lilly’s antiplatelet drug prasugrel (Effient, partnered with Daiichi Sankyo) and Bristol’s diabetes therapy saxagliptin (Onglyza, partnered with AstraZeneca).

Both products were introduced during the quarter, and both posted similar initial sales (about $20 million in the US) during the period. There’s nothing wrong with those launch sales—but the question is: did any of those pills make it out of the distribution channel and into the hands of patients?

That’s where the underwhelming IMS data have raised concerns. Its early days, of course, but neither product is tracking anywhere near the blockbusters already in the market. Effient hopes to approach the performance of Bristol’s Plavix, now the number two drug in the world, while Onglyza matches up against Merck’s Januvia, which is arguably the one launch of the past five years that bears any resemblance to the blockbuster model of the 1990s.

For Lilly, of course, the starting point is recognizing that the IMS data are more or less irrelevant to the launch, since most prescriptions will be written in the hospital in the context of an acute coronary intervention—and then it’s the refills upon discharge that get picked up in traditional channels.

Still, there’s not much to point to as evidence that Effient is doing well. Here’s what Lilly IR exec Nick Lemen said during Lilly’s Oct. 21 earnings call.

“We are diligently executing our launch plan. Obtaining hospital formulary status is critical to the uptake of a hospital-based product like Effient. As we've said in the past, gaining wide-spread hospital formulary status will take roughly six months. To date we're on track to achieve our hospital formulary goals. As we move forward, in addition to working to gain formulary status, we'll be focused on communicating formulary availability to physicians and seeking initiation of appropriate ACS/PCI patients, particularly those under 75 years of age and those over 132 pounds of body weight who have not had a TIA or stroke. Payer access is also meeting our expectations of interim formulary status of Tier 3 unrestricted. We're especially pleased that as of October 1st Effient has Tier 2 unrestricted access with Express Scripts in both commercial managed care and Medicare Part D.”

That didn’t exactly wow ‘em on the call, especially since—as one analyst pointed out—Lilly had previously talked about achieving “rapid” formulary access in hospitals and the six-month time line sounded new.

As for Onglyza, here is what Bristol President Lamberto Andreotti had to say during that company’s Oct. 22 call:

“I think that's a good opportunity for me to say that we are pleased from what we've seen so far. We are executing against our plan….We are very pleased to see that now we are in the marketplace, awareness is going up from nearly zero at the beginning, to a good percentage now. The number of trials, the number of doctors that are using Onglyza is increasing. I saw some data on intent to prescribe, which is also going in the right direction and access is going the right direction.”

That didn’t exactly set the analysts' hearts a pitter-pattering either.

There’s no denying it: both brands are indeed starting slow. The question is whether the rule of thumb that blockbusters start fast needs revision.

That’s where both Lilly and Bristol have a case to make: the world has changed, and the old blockbuster model has to change with it.

For starters, reimbursement matters now, much more than it did in the blockbuster era. So those stats about formulary access are important—not just something to talk about other than IMS numbers.

And then there is the regulatory change. Effient is covered by a formal Risk Evaluation & Mitigation Strategy, set to be in force for two years. We’ve argued since the REMS were enacted that one implication will be to slow down product launches, with blockbusters more likely to follow something like the Prozac model (a slow uptake followed by an explosive breakout) rather than the billion-dollars-in-year-one-or-bust model.

Onglyza doesn’t have a formal REMS, but it is entering a changed marketplace, redefined by the safety concerns raised in the context of GlaxoSmithKline’s Avandia. Bristol’s challenge is, in effect, to reaffirm the idea that innovation in diabetes care can be safe—a task not made any easier by the fact that the company’s marketing materials still aren’t approved by FDA, even though the drug is.

Indeed, for both Effient and Onglyza, we would argue that a slow start is exactly what regulators want to see—in effect, a final trial period where use expands slowly, rather than take the risk of exposing hundreds of thousands of new patients in the first months after approval.

Rather than focus on the different metrics presented by the two companies, investors would be well served to consider another point Bristol’s Andreotti made. “We launched in a different US than the US of many years ago.”

That is undeniably true. Whether Effient and Onglyza will ultimately achieve blockbuster sales is a different question, of course. But a slow start is no longer enough to rule out a blockbuster finish.

DotW: Same As The Old Boss

c.morrison@elsevier.com (Chris Morrison) — Fri, 23 Oct 2009 13:05:19 PDT

Whiners, do-gooders and underdogs, go back to bed. Make yourselves some herbal tea. Go write in your journal or do a little scrapbooking. Maybe you’ll feel better.

This was not your week, in which we saw nothing less than the restoration of the natural order of the universe. Here’s to the golden rule: Those with the gold make the rules! To celebrate, In Vivo Blog is leaning back in its buttery leather armchair, warming its feet by the fire, and puffing an obscenely large stogie. You don’t like it? Go complain to the Parent-Teacher Association or Toby Flenderson.

First of all, nothing says “Them’s That Got It Should Flaunt It” quite like the New York Yankees steamrolling their way through the playoffs. They didn't quite clinch the American League pennant last night, but it’s a matter of time. Inhale, my friends. You catch that? It’s called ruthless dynastic victory, and it smells like a mysterious blend of exotic saffron, blood orange and dark woods. It also smells like the $425 million the Yankees guaranteed to three free agents last winter.

But the Pinstripers got nothing on Pfizer, whose $65 billion-ish takeover of Wyeth just closed, even though along the way the biggest and baddest needed a little help from its big, bad friends, some of whom nearly brought down the global economy. (Naughty little doggies!) In January Pfizer scraped together $22.5 billion in loans -- you know, those things financial institutions theoretically give to businesses to keep the world from grinding to a halt -- from a bank consortium led by some of the biggest bailout recipients, including Citigroup and Bank of America. And they did so back when it was easier to sneak a rich man into heaven than to squeeze a loan through the eye of a banker.

Further adding to the warm plutocratic glow this week, some of Pfizer’s lenders are back in the money themselves -- because God knows they’ve earned it -- with bonuses ready to flow like champagne, or even better, in addition to champagne. Nothing like a few Benjamins soaked in Perignon and tossed onto a baccarat table to get everyone’s attention. Party on! This is what America was meant to be!

Wait a second. Who let the party pooper in?

Stay vigilant, my friends, lest the wet-blanket malaise spread to our little corner of the world. To wit, we noted a disturbing lack of dance-on-your-grave, eat-or-be-eaten M&A this week. All we got were collaborations. Alliances. Partnerships. Oh, and an option-to-acquire. It’s practically socialist. We might as well hold hands, give everyone a pat on the head and a gold star, and sing “This Land is Your Land.”

But if that’s how you like it, then slice up your tofu, lightly steam your kale, and sprinkle on your low-sodium tamari as you enjoy another edition of...

Morphosys/Daiichi Sankyo: Were we expecting Morphosys to sign the kind of antibody discovery and development alliance it inked with Daiichi Sankyo this week around its HuCAL Platinum antibody library? Not really. Because Morphosys’ ten-year discovery and development deal signed in late 2007 with Novartis—one of our favorite deals for several reasons—is designed to eventually replace Morphosys’ existing discovery deals as those alliances expire. Eventually Novartis will become Morphosys’ exclusive discovery partner in nearly all therapeutic areas, so we thought new discovery deals were off the menu. However, that lucrative Novartis pact specifically excludes infectious diseases, and on Oct. 20 Morphosys announced it would team up with Daiichi to tackle hospital-acquired infections. In addition to the technology license fees and R&D funding that Morphosys typically extracts from a development partner, Daiichi will also fund development of certain infectious disease-specific technologies inside Morphosys. The biotech didn't disclose deal terms but says they're in line with its other discovery agreements, which have included roughly €9 to 12 million in milestone payments from discovery to market (per program), followed by mid-single digit royalties on future product sales. — Chris Morrison

Cubist/Hydra: Cubist Pharmaceuticals took another step beyond nasty bugs by tapping Boston-area neighbor Hydra Biosciences in a small, two-year deal for pain-killing compounds drawn from Hydra’s ion channel program. Cubist is paying $5 million upfront and $5 million a year in R&D funding for two years, with an option to renew. The firm is best known for the antibiotic Cubicin (daptomycin), which is on track for half a billion dollars in revenue this year as methicillin-resistant staphylococcus aureus (MRSA) continues its spread. But Cubist is pushing hard to diversify beyond antibiotics and also has phase-2 candidate ecallantide, in-licensed from Dyax, to treat blood loss during on-pump cardiac surgery.

Alcon/Potentia: No ophthalmologic indication has caught VCs’ eyes more than age-related macular degeneration, with more than $600 million in funding committed in the last decade. (For more on AMD, peep this recent Start-Up feature.) Much of the interest stems directly from Genentech/Roche’s success with Lucentis, an anti-VEGF therapy. Beyond anti-VEGF, the mechanism of greatest interest is interfering with the highly conserved complement pathway, which plays a crucial but ill-understood role in triggering the inflammatory aspects of AMD. At least eight companies are aiming to develop complement inhibitors, and we finally have our first deal in the space. On Friday, Oct. 23 came news that Alcon locked up licensing rights to Potentia Pharmaceutical’s POT-4, a complement inhibitor poised to begin Phase II clinical trials in AMD. The agreement allows Alcon to investigate POT-4 in other ophthalmic disorders and gives the specialty player the right to purchase Potentia outright if specific development milestones are reached. No financial details were disclosed, so we don’t yet know the possible return to Potentia’s backers, Healthcare Ventures and MASA Life Science Ventures. But the two firms have put $17 million into the company since 2007, when Potentia raised an initial $5 million Series A. It’s the second milestone-driven acquisition Alcon has signed in the past 6 weeks. In mid-September the specialty eye company acquired large molecule player ESBATech for $150 million upfront and another $439 million in earn-outs. – Ellen Foster Licking

Human Genome Sciences/Novartis: Perhaps the biggest deal number of the week stemmed from a 2006 alliance. On Oct. 21 HGS reported it rang up a $75 million milestone from partner Novartis as it ushered hepatitis-C treatment albinterferon alfa-2b toward a filing for market approval in the U.S. and Europe, where the drug will be known as Zalbin and Joulferon, respectively. The firms will share profits stateside as well as development and marketing costs, and Novartis takes the reins in Europe. HGS has already earned $132 million under the deal, including a $45 million upfront. The deal called for a potential total of $507.5 million, so the latest milestone puts HGS about 40% there. Not bad for biobucks.

And just when all these partnerships had you ready to sing Kumbaya...

Biogen Idec/Facet Biotech: Perhaps more accurately, it’s no deal yet. Facet informed us Oct. 19 that a measly 0.1% of its stockholders had tendered shares in Biogen Idec’s hostile bid at $14.50 a share. Biogen launched the bid in September. Considering Biogen co-owns two of Facet’s key pipeline programs, it’s hard to see this ending up as no deal. The only question is how high will Biogen go.

Photo courtesy of flickr user Paul Simpson.

Thank You

c.morrison@elsevier.com (Chris Morrison) — Fri, 23 Oct 2009 11:07:15 PDT

I ain’t saying this is my final blog post.

But it is my last one as an employee of Elsevier Business Intelligence, this blog’s publisher. As of November 2, I’m relinquishing my operating role, taking a few steps back, and figuring out what’s next in my life. (I’ll still be around, consulting with Elsevier a few days a week, at least for the immediate future.)

Elsevier has been a great acquirer: in the 18 months since they bought Windhover, we've pretty successfully melded two very distinct editorial and marketing groups. I’ve liked running the combined pharmaceutical group; we've put together an extremely capable group of successors. This place has all the talent it needs.

And it's time to let them have their chance to run things while I figure out the next thing to do, taking some time off to let my subconscious health-care mind play about on the problem.

It's been a great ride. I’ve had the nearly unique opportunity to go to graduate school in the pharmaceutical industry by reporting on pretty much whatever I wanted to, without much worrying about how the folks reading it would react and while naively assuming that what I wrote would be of some value to at least some readers. It's paid the bills. And you can’t ask much more than to combine your avocation with your vocation.

For that extraordinary gift, I’ve got to thank many of you – customers, contacts, colleagues. I've bugged you for interviews for articles, for talks at our conferences, for business advice. And you’ve helped me far more than I should sensibly have hoped.

I’m humbled by your generosity.

Roger Longman

Allergan’s First Amendment Case: REMS vs. Off-Label Promotion – and DTC

c.morrison@elsevier.com (Chris Morrison) — Fri, 23 Oct 2009 01:15:11 PDT

Allergan filed suit against the Food & Drug Administration on Oct. 1, challenging the prohibition of off-label promotion of prescription drugs in the context of a new Risk Evaluation & Mitigation Strategy for the botulinum toxin therapy Botox. At the time, we had just gone to press with a story talking about how REMS might redefine pharmaceutical marketing.

Our thesis: that REMS offer at least the opportunity for commercial organizations to redefine practices viewed skeptically—things like speaker’s bureaus, scripted sales calls, “seeding studies,” etc.—as regulatory obligations that promote the public health. And that, done properly, both the commercial organization and the public health might well come out ahead. (You can read the article here.)

We’ve had the opportunity to discuss that article now with marketing professionals in several contexts, including industry meetings and one-on-one conversations. It fair to say there has been a range of opinion on our thesis--ranging from "you are completely crazy" to "you are completely crazy but you just might be right.”

Having had time to explore the implications of the Allergan suit, we now think we weren't crazy enough. It turns out that REMS aren't just offering a path to rehabilitate controversial marketing practices to support approved indications, they may in fact open the door for companies to promote unapproved uses without inviting crushing regulatory and civil penalties. That, at least, is Allergan's argument (which we explained in depth in “The Pink Sheet” here).

It is a long shot at best to think that Allergan will pull off a complete victory in the case—long in both the sense that most folks we’ve talked see the odds of victory as slim, and also long in the sense that a complete victory would almost certainly involve litigating all the way up to the Supreme Court.

But regardless of the outcome of the suit, the case is an extremely interesting new wrinkle in the still rapidly evolving field of REMS. (Sorry, there is something about Botox that makes puns irresistible.)

Because the simple truth is that FDA now has the authority to do exactly what Allergan wants—allow, or indeed, require greater communication about off label uses. The suit focuses on the fact that FDA is not allowing as complete communication as Allergan wants—but the fact is that FDA could allow that under the existing law and in some sense “approve” an off-label promotion campaign. We doubt they will for Botox, but we’ll keep our eyes peeled (is that another pun?) for a case where they do.

The Allergan suit highlights another thing marketers should anticipate in the context of a REMS: the re-emergence of commitments by sponsors not to advertise their products to consumers in the context of the new programs.

Early versions of the 2007 law included provisions that would explicitly have allowed FDA to impose a moratorium on DTC in the context of a REMS (and the agency already had done so in at least one “voluntary” risk management program negotiated before the law took effect.) Advertisers worked hard to get that provision stripped from the bill, but they did not get anything written into law that would stop sponsors from negotiating those types of provisions as part of a REMS anyway. (We covered all that here.)

How does that relate to the Allergan lawsuit?

In its court filing, the company lays out the off-label campaign it wants permission to conduct—in essence, the REMS agreement it wishes it could get.

And one of those provisions states: “Allergan does not seek to engage in direct-to-consumer communications about the off-label use of Botox.”

That's another one we'll be watching for: the first REMS that includes some limitations on DTC. And our hunch is it will be an agreement that the sponsor is only too willing to make.

Financings of the Fortnight is Mr October, But VC Funding Off in Q3

c.morrison@elsevier.com (Chris Morrison) — Thu, 22 Oct 2009 11:51:46 PDT

Life sciences VCs, like the defending World Series champion Philadelphia Phillies, tend to rely on the long-ball. Unlike those Fightin’ Phils (who, in case you missed it, are on their way to a second straight Fall Classic courtesy of a four-home-run burst of power), many VCs are struggling.

Not only are private biotech investors having a power outage—too few acquisitions for big multiples—but (on the whole, some VCs are clearly doing very well) they’re running low on cash necessary to replenish their line-ups with solid home-grown talent or big free agent signings.

So—without further extending the metaphor—we’re therefore seeing poor biotech venture investment numbers. Have a look at when life sciences venture groups raised their last funds—some are nearly running on empty, thanks to a combination of sub-par performance and global economic calamity.

And VCs without a lot of dough to spend don’t tend to spend a lot of dough.

And that’s exactly what Dow Jones reported earlier this week, based on figures from its VentureSource database:

[Biopharma] companies raised $810.9 million in 83 third-quarter financings, down from the $1.18 billion raised in 67 deals in the second quarter. The 3Q investment total represents a 33.6% drop from the $1.22 billion invested in 73 biopharmaceutical rounds in the corresponding quarter of last year.

Trawling our own Strategic Transactions database yields similar results. Our 'biotech' venture deals (clearly a slightly different category than DJ's 'biopharmaceutical' companies) suggest a 34.4% drop from Q3 2008 to Q3 2009. During last year's quarter there were 52 biotech venture deals that raised a total of $1092 million. This year there were again 52 deals but those deals totaled only $716 million. Funding was down from the second quarter of 2009, but not as markedly: total biotech VC funding declined 20.6% from quarter to quarter.

But, thanks to the Phillies' victory in the NLCS last night, we're in a good mood (about a third of your regular IVB contributors support the Phils, in case you hadn't spotted it) and so we don't want to leave you feeling gloomy. So how 'bout some highlights:

Corporate venture continues to have a significant impact on the financing scene and some deals done over the past two weeks provide ample anecdotal evidence of the trend (for less anecdotal and more ample evidence, check out this recent Start-Up feature).

GlycoMimetics $38 million Series C was backed by new investor Genzyme Ventures and returning corporate VC the Novartis Venture Fund (among others). And newcomer Envoy Therapeutics took in $8 million from lead backer 5AM Ventures with Roche Venture Fund and Takeda Research Investment in the mix too.

And the past few days have seen big venture rounds from the likes of Lux and Flexion--which we'll talk about below. These deals aren't grounding into 6-4-3 double plays. They are ...

Flexion Therapeutics: In June, Flexion Therapeutics closed the last of three in-licensing contracts, garnering it a total of five compounds, all more or less following an anti-inflammatory theme. With this portfolio in hand, Flexion was finally able to close its $33 million Series A (here’s a piece we did when the company was founded, back in 2007). Flexion is built around its management’s experience with Lilly’s Chorus division (see this IN VIVO article), an experimental development group built around Flexion co-founder Neil Bodick, MD’s notion of “truth-seeking behavior” in clinical development. The idea is to get a new molecule to proof-of-concept for less than $5 million and in less than two years. Flexion CEO Michael Clayman and Bodick both left Chorus, sponsored by Versant Ventures, to try the notion in a start-up. They theorized that discovery productivity had outstripped development capacity at most pharmas, whose execs would therefore be willing to out-license market-baskets of pre-proof-of-concept molecules to Flexion in return for claw-back rights on one or two that piqued their interest. Indeed, says Clayman, pharmas loved the idea, and the company did at least some due diligence on about 130 compounds, looking for those few that also fit particular development and commercial criteria suitable to a small company’s potential. In the first place, they were looking for compounds whose regulatory paths appeared relatively straightforward (e.g., locally acting vs. systemic). In the second, they wanted drugs that could look commercially attractive to larger companies – but which could also be developed and sold by a somewhat older Flexion if it hadn’t been able to sign out-licensing deals on attractive terms. According to Clayman, they found the molecules which fit its criteria. But the deals took longer than expected to sign and meanwhile the financial markets tanked. Venture funds – the diminishing number with significant money left – grew more conservative, looking for excuses not to invest. Sofinnova, which is fundraising now, was nonetheless intrigued enough by the Flexion compounds to join Versant and Versant’s frequent collaborator 5AM Ventures in the new round. As for the pharma deals themselves: watch this space.--Roger Longman

Talecris Biotherapeutics: So far October has been a busy month for Talecris Biotherapeutics, maker of therapeutic proteins extracted from plasma. Only two weeks after completing its initial public offering--the net proceeds of which cut its $1.1 billion in debt by almost half--the company now is essentially eliminating approximately $593 million in existing debt it owes in the short term (based on calculations using figures as of 6/30/09), and replacing it with a longer-term loan due in 2016. On October 16 it sold $600 million in seven-year 7.75% senior notes to institutional investors. The final proceeds, which were $50 million higher than the company intended when it announced the transaction a few days earlier, will be used to pay back first and second lien term loans that mature in December of 2013 and 2014, respectively, as well as a portion of its existing credit facility with certain banks including Wachovia and Wells Fargo. The money raised from this debt sale was actually higher than what Talecris grossed in its $550 million IPO of 29 million shares at $19, a price that the market seems to have accepted--closing prices in the days after the initial offer were in the $21 range, and stock is still trading above $19. Talecris’ IPO, which was its second attempt after market conditions prevented the company from completing its first try in 2007, isn’t expected to make waves in the IPO market for traditional venture-backed biotechs like Anthera, but is still a good sign. Talecris also reached another milestone this month--days after the debt financing was completed, the FDA approved Prolastin-C, a higher concentration of the company’s twenty-year-old product Prolastin for alpha 1-antitrypsin deficiency--Amanda Micklus

Amarin: In the second tranche of a PIPE deal initiated in May 2008 (deal# 200830272), this Irish biotech was recapitalized Oct. 13 with $70 million - $66.4 million in cash proceeds along with $3.6 million from the conversion of convertible bridge notes. The money will be used to finance Amarin’s lead program –AMR101, a prescription grade Omega 3 fatty acid for a pair of dyslipidemia indications – and comes with significant warrant coverage. The cash proceeds came from the sale of $1 units comprising a full American Depositary Share in Amarin, plus a five-year warrant for half a share, exercisable at $1.50. The bridge notes were converted at $0.90 a unit, also comprising a full share and a five-year warrant. The deal was priced in July at a 22% discount, but the actual discount was even higher as Amarin’s stock was trading in the $1.60 range on the day of the transaction. Sofinnova Ventures led the round, as it did in the May 2008 private placement that netted Amarin $27 million. Despite those proceeds, Amarin had been operating via bridge financing in recent months, most recently announcing a $2.6 million bridge loan in July to continue operations. The second tranche initially was planned as a $55 million deal with the existing investors – Sofinnova, Orbimed Advisors and Longitude Capital. However, the expanded round also brought participation by Abingworth, APG Asset Management, Great Point Partners, Tavistock Life Sciences Company and RA Capital. Abingworth’s Joe Anderson, an Amarin board member, said the proceeds should be sufficient to get the company to an NDA filing, expected no later than 2012. For our full coverage of the deal from "The Pink Sheet" DAILY, click here.--Joseph Haas

Lux Biosciences: Like most biotechs, this ophthalmology specialist and its backers might have had their sights set on getting acquired once Phase III data for lead uveitis compound oral voclosporin (a.k.a. LX211 and now dubbed Luveniq) came through. Those results were somewhat positive, though not without hair (one of three Phase III studies was 'underpowered' and another did not hit its primary endpoint due to discontinuations), and for whatever reason a deal hasn't materialized. (Not terribly unusual for the venture-dollar-rich-but-relatively-exit-poor ophtho space.) But the company and its VCs remain confident that Luveniq has a bright future--and are doubling down on their initial investment to finance the ride. Lux announced this week a $50 million Series B supported by its existing investors SV Life Sciences, HBM Bioventures, Novo AS and Prospect Venture Partners (those same investors backed the company in a $49mm Series A in 2006). The cash (some of which has already been spent--it will be used to pay back bridge loans from those same VCs) should take Lux through Luveniq's expected US and EU filings later this year (the compound has orphan drug designation in both territories and fast-track status in the US, and Lux will apply for priority review) and--if all goes well--toward the drug's potential launch in 2010, CEO Ulrich Grau told us for a story in "The Pink Sheet" DAILY. Will suitors come a-callin' then?--CM

O Biotech Brother, Where Art Thou?

c.morrison@elsevier.com (Chris Morrison) — Wed, 21 Oct 2009 07:44:40 PDT

Luke Timmerman of Xconomy.com caught a speech recently by Seattle biotech guru Christopher Henney, cofounder of Dendreon, Icos, and Immunex -- not too shabby a track record, eh?

Henney regaled the audience of investors with his five red flags of biotech. (Five Red Flags? Sounds like an amusement park...in Hell.) The last red flag caught our eye: "Family members in key roles."

Why does this ring a bell? Wait a sec: Seattle biotech Omeros just went public, the first "pure-play" biotech to do so in 18 months or so, and with a legal cloud over its head to boot. It got a lot of press, and not just from us. What's more, Omeros features the Brothers Demopulos. Gregory is chairman, CEO, and chief medical officer and Peter, a prominent local cardiologist, is a board member. The tally: Six board members, two Demopuli.

We had to ask Henney if he had Omeros in mind when he told the investor crowd, "If you see a board dominated by siblings, or a couple of siblings in key management roles, I’d run, not walk.”

He was gracious enough to answer our email, saying he didn't know "sibs" were involved at Omeros. He explained his dictum thusly: "The principle is that the presence of sibs at the top is a barrier to recruitment of top management and inhibitory to best management practices at all levels. Biotechs do not lend themselves well to family businesses in my opinion, and in particular in the public sector."

After pricing its Oct. 7 IPO at $10 a share, Omeros closed nearly two weeks later at $6.82.

Let's hear from you: Are you pro-family values or against 'em when it comes to building a startup? Are there any other examples out there of biotechs that keep it in the family?

Never Mind The Delay, Amgen Puts D'mab on its Website

c.morrison@elsevier.com (Chris Morrison) — Wed, 21 Oct 2009 11:31:18 PDT

The Amgen team must have felt rather bullish that the FDA would approve denosumab today, since it is the PDUFA date. So they loaded this link on the biotech’s web site for anyone seeking information on reimbursement issues. [UPDATE: Amgen has removed the page and we didn't take a screengrab, but we have the new logo, below. ~~UPDATE 2: Here's the page, rescued by commenter rob using Google cache.~~]

Never mind that it was still possible the agency would issue a complete response letter, which would cause a delay. And sure enough, that’s just what happened. The agency is requesting several items, including more detail about a post-marketing surveillance program (see the statement).

Reimbursement info is rather important to place on web sites, of course, given that more and more people are having difficulty affording their meds, especially during the recession. So this is a good public relations move, not just a genuinely helpful gesture. Pricing for denosumab, which Amgen has dubbed Prolia, is expected to cost about $1,000 a month, according to earlier reports, although that may change.

In any event, this isn’t the first time that Amgen has somehow gotten ahead of the FDA over a drug approval. In July 2008, BusinessWire issued a press release saying the agency had approved the Nplate blood clotting drug, albeit with certain risk management requirements. But the premature release embarrassed Amgen, which forced the news service to issue a retraction.

'false start' image via nfl.com

Wyeth Quits On Relistor; Surprise Victory in First REMS Test Market

c.morrison@elsevier.com (Chris Morrison) — Mon, 19 Oct 2009 07:23:01 PDT

It is no surprise that Wyeth is willing to pay $10 million to wash its hands of the opioid-induced constipation therapy methylnaltrexone (Relistor), returning all rights to partner Progenics Pharmaceuticals.

The “transition payment” to unload future obligations is clearly a case of a throwing a bit of good money after bad, when the alternative—continuing to support the product as demanded by the partnership agreement despite negligible sales—would entail throwing a lot of good money after bad.

So it is not a surprise that Wyeth gave up on Relistor per se—but it is a surprise that Wyeth gave up on its opioid-induced constipation partnership when GlaxoSmithKline did not.

This time last year, it sure looked like Wyeth and Progenics had a much better chance of making their partnership work, while GSK—big pharma partner for Adolor’s mechanistically similar therapy alvimopan (Entereg)—had no reason to push forward.

Relistor and Entereg have a lot in common. The two drugs were approved at almost the same time in mid-2008 to relieve constipation in high-risk subpopulations. They share a similar mechanism of action, targeting the mu opioid receptor. Both were small molecules developed by small companies (Progenics and Adolor, respectively); both had big pharma partners eager to commercialize them, eyeing a blockbuster market opportunity: routine use to prevent constipation associated with chronic opioid use.

And both ran aground late in development when safety issues emerged.

That’s when things got different.

Neither product had a smooth path through the "Safety First" era Food & Drug Administration, but Entereg came to market with an ultra-restrictive indication (short-term, inpatient use in post-surgical patients only) and even more restrictive post-controls designed to ensure there is absolutely no long-term or outpatient use. It marked one of the first uses by FDA of its new Risk Evaluation & Mitigation Strategies authority granted by the FDA Amendments Act of 2007—and an early example of how the new tools really can dramatically limit the potential patient population for a new drug. (See “Entering the World of REMS,” The RPM Report, July 2008.)

Relistor was also approved with a narrow initial indication (subcutaneous use for terminally ill cancer patients on opioids), but without any special restrictions upon approval, not even mandatory post-marketing safety studies, making it an increasingly rare example of a new molecular entity approved in the FDAAA era without triggering any of the agency’s new post-marketing safety tools. (See “FDAAA Impact Analysis,” The RPM Report, May 2009.)

It’s safe to say that neither GSK nor Wyeth was thrilled with what they eventually found themselves marketing. But if you had to bet which would give up first, it sure looked like a safe bet that GSK would bow out of Entereg. After all, GSK was stuck with a hospital product instead of a primary care blockbuster; Wyeth at least had access to the primary care market, even if it didn’t yet have a blockbuster indication.

Well, it didn’t work out that way.

Not only did Wyeth give up on Relistor first, it paid Progenics an additional $10 million on top of at least $160 million in milestones and product development costs already paid--just to get the brand off its hands.

GSK, on the other hand, backed out of any further development of Entereg, but the company has continued to market the drug for the approved indication—post operative ileus—despite the strict, hospital-only access program. Entereg’s no blockbuster: with sales of just $5 million in the second quarter, it is not even a rounding error in GSK’s results.

But its doing better than Relistor, which posted sales of only $3.2 million during the quarter. More importantly, Entereg’s modest sales could potentially pay off the modest cost of marketing the drug via GSK’s hospital sales organization.

Not so with Relistor, where even a 10x ramp up in sales would make it difficult for Wyeth to justify continued support for the brand—especially in the context of the now complete Pfizer merger.

So, if (as we suggested at the time of the approvals) Entereg vs. Relistor marked an early case study of competition between products saddled by a REMS and products without restrictions, score a victory for marketing under a REMS.

Okay, we’re not overstating the case here. There’s essentially no way that Entereg will pay back GSK’s investment in the product. But there is also no denying that GSK will end up much better off than Wyeth did with Relistor, even though Relistor had the “clean” approval.

Its not like GSK and Adolor wanted a REMS. But having got one, the companies may end up demonstrating that commercial success is possible despite restrictive programs—and may even be enabled by them, since constraints on marketing by definition limit the marketing investment to commercialize REMS products.

Put another way, if you need to create a new commercial model anyway, it may help to be prohibited from using the old one.

Vasella: Strategies for a Maturing Industry

c.morrison@elsevier.com (Chris Morrison) — Mon, 19 Oct 2009 06:00:07 PDT

Dan Vasella has been running Novartis since it was created in the 1996 merger of Ciba-Geigy and Sandoz. But it’s fair to say that in the past 13 years, he’s never had the environment headwind he has today.

At Cleveland Clinic’s Medical Innovation Summit, we got the chance to sit down with Dr. Vasella for a Q&A discussing some of these headwinds (R&D productivity, health reform) – and just how Novartis plans to sail through them.

Without more ado, here’s our conversation.

For a link to our conversation with AZ’s David Brennan, also at the Clinic’s Summit, click here.

While You Were Starting the Wild Rumpus

c.morrison@elsevier.com (Chris Morrison) — Mon, 19 Oct 2009 05:39:50 PDT

Hope you had a good weekend. We've rounded up a few Wild Things so you don't have to spend the price of admission looking for them. Of course we hear the movie is pretty good, too.

Wild and crazy technology: Did you know? You e-book people can now read The IN VIVO Blog on Kindle. See too our friends at OTC Today, also available on your funky future book machine. AZ chief David Brennan loves his Kindle, according to this Times profile, probably because he can get IVB on it.
Wild geese, chased: Via Bloomberg, President Obama describes insurance industry anti-reform tactics: "It's smoke and mirrors. It's bogus." To which Bill S. Preston, Esq. and Ted "Theodore" Logan respond: "duude." (Bill & Ted presumably also totally bummed about swine flu's affects on nation's beer pong habits. No way? Way.)
Not so wild about the idea: FDA completely responds to Genentech and Biogen Idec regarding earlier use of Rituxan in rheumatoid arthritis. Let us summarize for you: "no, because of PML." UPDATE: FDA also looking for more information on Novartis/Vectura COPD hopeful QAB149, reports Reuters. UPDATING THE UPDATE: And Amgen's denosumab makes it three big Complete Responses, the biggest saved for last. We'll have more later in 'The Pink Sheet' DAILY.
O(be)s(e)car Wilde: (OK that's one's a stretch.) The NYT has a good take on the race to bring a new obesity drug to market, starring Vivus, Orexigen, and Arena. (Hey we said there'd be lots of these ...)
Mr. Uninsured's Wild Ride: In WaPo, a first person account of what it's like to be 51 and well (and well-off) but uninsured.
P.S. What's a pirate's favorite Annual Scientific Meeting? A-C-Arrrrrrrr! Get all the headlines here. Thanks folks, we're here all week. Tip your waitresses.
UPDATE: Wild Pitch: Bnet takes hypey but vowel-rich biotech Epeius down a peg.

DotW: From Russia With Love

c.morrison@elsevier.com (Chris Morrison) — Fri, 16 Oct 2009 08:09:42 PDT

It's the end of an era--or maybe just the end of the beginning. This week saw the WYE ticker officially disappear, as behemoth (Pfizer) gobbled up the merely big (Wyeth). Two small firms--La Jolla Pharmaceuticals and VaxGen--also entered Biotech's Bermuda Triangle to the surprise of few.

It also appears to be the end of the beginning for the "FIPNet" strategy as the industry continues to pursue the "virtual is the new reality" approach to drug discovery. Thus, Big Pharma's focus these days is on externalization, especially the ability to sign partnerships that put the onus on the ally. In exchange for taking on a greater proportion of both the risk and cost of development, a smaller partner gets the chance to take a bigger chunk of the downstream economic reward if said research pans out.

Nowhere has the strategy been more evident than in Asia, where Big Pharma hopes to tap into the increasingly high quality research available in India and China--countries that also should prove to be a major source of future customers. Merck and Lilly in particular have been active, signing deals with Advinus (Merck), Glenmark (Lilly), Nicholas Piramal (both), and Hutchison MediPharma (Lilly). (Speaking of Asia, don't forget about our PharmAsia Summit in a couple weeks ... )

Now the FIPNet action--or something similar, anyway--is moving to another closely watched emerging market: Russia. This week Roche announced an interesting licensing deal with Viriom, a Russian biotech founded earlier this year. As it turns out, Viriom was formed specifically to develop and commercialize (in Russia, Ukraine, Belarus and Kazakhstan) Roche's pre-clinical non-nucleoside inhibitors of reverse transcriptase (NNRTI) for the treatment of HIV/AIDS--although it's free to develop and license other targeted medicines in HIV too.

We're not quite talking Roche's FIPNet initiation here, mind you; "we don't believe this is the same kind of deal," asserts Roche Pharma Partnering's Peter Sandbach; "the intention was not a risk-sharing one." Roche didn't intend to develop the compounds internally--so it's more about leveraging de-prioritized assets than pulling in partner to share development risk--although granted, the Swiss pharma will be allowed to use Viriom-generated clinical data for its own use and retains rights in all other territories. Viriom will pay Roche royalties on sales of any resulting treatments in its territories.

For the Russian start-up, this deal brings close involvement of an experienced HIV drug developer, given that Roche personnel will participate on Viriom's board. Indeed, Roche reckons this deal is a first for Russian biotech, given that Viriom will take the assets all the way to market.

For Roche--which isn't paying a dime--the deal provides a useful catalyst for building up a presence in a growing market. It provides the Swiss group with a nice 'in' with the Russian government, keen to create home-grown 'bioclusters' and to encourage innovation. "The compounds licensed to Viriom will help to create a Russian BioCluster/Incubator," noted Tuygan Goeker, Roche's regional head of Central & Eastern Europe, the Middle East, Africa, and the Indian sub-continent in the PR.

It wasn't all Ruskies and FIPNets all the time, of course. There was progress on the health care reform front, the DOW hit 10,000 and deal-makers shook (not stirred) things up, just in time for us to decode them with our special LEKTOR device.

Onyx/Proteolix: In an attempt to fill a mid-stage pipeline gap, Nexavar maker Onyx announced Oct. 12 plans to acquire privately-held Proteolix for $276 million in upfront payments and another $585 million in milestones. The deals give Onyx a promising Phase II multiple myeloma medicine, carflizomib, which has been billed as a next-generation version of Takeda/Millennium's first-in-class proteasome inhibitor, Velcade. The acquisition positions Onyx to expand into the global $16 billion hematological cancer market with a potential blockbuster--if carflizomib proves more effective than Velcade, which last year raked in over $1 billion. (Carflizomib is touted as being more specific, so troubling off-target effects, especially neurotoxicity, should be limited.) The deal structure is heavily weighted towards milestones, with most on Wall Street favoring the tie-up. VCs are likely happy too--it is an exit, albeit not one of the richest ones we've seen in the industry. Since its founding in 2003, Proteolix has pulled in more than $125 million in financing, including a whopping Series C of $79 million last July. That means the return on the upfront money is only a little over 2x for Proteolix's investors, which include Delphi Ventures, Nomura Phase4 Ventures, and Advanced Technology Ventures. Of course, if carflizomib is a major success and the earn-outs are realized (and you know where we stand on the odds of this happening), that return will jump to around 7x, which sounds a whole lot more venture-like.--EFL

Novartis/Heptares: Another week, another Novartis Option Fund deal. This time, the investment, a $30 million Series A in Heptares, a UK biotech that specializes in stabilizing GPCRs so they can be poked and prodded after being removed from the cell membrane, was announced months ago. NOF, Clarus Ventures and MVM Life Science Partners invested equally in the round. Why the delay on the option component of the deal (which we should note again is distinct from Novartis' venture investment)? The companies simply took their time deciding which GPCR target to work on, Heptares CEO Malcolm Weir told IN VIVO Blog. And after lots of discussions with various therapeutic area groups at Novartis, Heptares is now getting to work, "starting from scratch on a GPCR we wouldn't have otherwise been working on," he said, though details of the target are thus far kept under wraps. The deal, with undisclosed upfront payments and milestones that could reach $200 million before royalties, sees Heptares driving drug discovery programs around the target and follows Novartis' stated M.O., avoiding Heptares' key assets in favor of a less-advanced program. For more info on Heptares check out this Start-Up profile of the company from earlier this year.--Chris Morrison

GlaxoSmithKline/Prosensa: In another sure sign of Big Pharma's recent embrace of specialist diseases, GlaxoSmithKline announced a four-compound deal this week with Holland's Prosensa, which is focused on RNA-modulating therapeutics for Duchenne Muscular Dystrophy. The deal hinges on a straightforward license component--Glaxo takes an exclusive worldwide license to lead compound PRO051, in exchange for a £16 million up-front payment. And far more typical for Glaxo, the drug maker also gets exclusive options to license three further RNA-based compounds. The total development and commercial milestones across all four candidates could reach £412 million, and Prosensa may also receive double-digit royalties. It isn't completely fair to call drugs for DMD specialist. They're actually ultra-specialist. PRO051, for instance, is designed to treat just 13% of the DMD population--a small proportion of an already highly niche disease. Indeed, the small market size was just one reason Prosensa's CEO Hans Schikan told "The Pink Sheet" DAILY, he didn't "in the beginning, honestly expect GSK to be interested" in the programs. But apparently niche is the new blockbuster (especially when meeting high unmet medical need practically guarantees reimbursement from payers). Schikan confirmed that GSK wasn't the only company sniffing around Prosensa's platform.--Melanie Senior

Novartis/Vanda: Vanda Pharmaceuticals' unlikely success with its once-maligned antipsychotic iloperidone continues. This week the biotech sold back US and Canadian development/commercialization rights to its newly approved lead asset to one-time owners Novartis, for $200 million up-front, plus milestones and royalties. Our full take on the deal is here.--CM

Wyeth/Progenics: Big Pharma mergers don't just create disarray for the integrating parties; they can be very stressful for smaller biotech partners, especially if their assets aren't central to the newly merged company's strategic endeavors. Thus, one of the hallmarks of mega-mergers is the unwinding of smaller deals. Just one day before Wyeth officially became part of Pfizer, it announced it was paying $10 million for Progenics to take back all development and commercialization rights to its opioid-induced constipation medicine Relistor. The two companies originally teamed up in 2005 in a deal that gave Progenics $60 million up-front, plus the potential to earn another $356.5 million in downstream milestones and royalties. But the injectable medicine, approved by the FDA in 2008, hasn't been a big earner--it garnered just $3.2 million in global net sales in the second quarter of '09. Although revenue was increasing substantially--up 74% from the first quarter--it seems Wyeth wanted to shed a low-earning asset prior to the Pfizer merger. And Progenics wasn't complaining. "Progenics has become increasingly aware that our objective of advancing the Relistor franchise was not aligned with the near-term priority of integrating these two large pharmaceutical organizations," Progenics CEO Paul Maddon said during an Oct. 14 investor call. The revised agreement leaves Progenics free to partner the medicine outside of Japan, where Ono Pharmaceutical locked up rights in 2008 for $15 million. In addition to the $10 million, Wyeth will also continue to provide manufacturing, marketing, and sales support for Relistor during a 12-to-15 month transition period, and will fund completion of an ongoing 1,000-patient Phase III safety study for the drug in chronic pain.--EFL

GSK In Tune with Lilly's Chorus on Cheap-to-PoC Idea

c.morrison@elsevier.com (Chris Morrison) — Thu, 15 Oct 2009 02:45:26 PDT

Most of you will have heard of Lilly's Chorus initiative, designed to drive compounds through to proof-of-concept as cheaply and quickly as possible. (If you haven't, read this.) Less well-publicized is GlaxoSmithKline's own discovery-on-a-budget experiment, known as VPoC, or Virtual Proof-of-Concept.

The six-person operation, conceived and run by SVP, Molecular Discovery Allen Oliff, MD, is actually a drug performance unit (DPU), set up 18 months ago at the same time as the other two dozen or so biotech-like-units that now comprise GSK R&D.

Oliff reckons the VPoC can produce PoC compounds--three of them in three years, to be precise--"at substantially lower cost" than in standard R&D. That's thanks at least in part thanks to "entirely out-sourced" activities including chemistry, running assays, drug metabolism and PK experiments and some clinical work, most of which occurs in China and India.

It also helps that GSK doesn't pay for the assets it puts through VPoC; they're either created using standard chemistry on targets taken from the literature, or they're de-prioritized GSK assets. The unit has selected three of the latter (out of many hundreds that were shelved) and is also working on five targets identified outside. As such, "we aren't licensing anything; we don't want to pay royalties or milestones," Oliff emphasizes. Like Chorus, VPoC--based at GSK's R&D site in Upper Providence, Pennsylvania--also saves money by being small, flexible and efficient.

The big question surrounding all these low-cost discovery initiatives is of course whether they simply push costs further downstream by doing less pre-PoC. (After all, if cheaper discovery was that easy, why isn't everyone doing it?) Oliff insists not. "We progress assets reasonably quickly, in a standard format, without cutting corners," he told The IN VIVO Blog.

The proof of the pudding will come when--and if, and how quickly--VPoC assets progress to the Medicines Development Centers (the DPU's 3-year objective also specifies two 'commit-to-Medicines Development' assets). Oliff hopes to deliver 'at least one, hopefully more' PoC assets as soon as next year.

Perhaps he's right to be optimistic. Chorus appears to have delivered; in fact it's been so successful that Lilly's Gino Santini, SVP Corporate Strategy & Policy, declared at Elsevier's Pharmaceutical Strategic Alliances conference last month that it was being cloned 'in India, and Indianapolis'. Meanwhile other large pharma have hinted at similar efforts to start fast-to-failure development A-Teams. And Flexion--created in 2007 by Chorus' founders to provide the same 'fast 'n cheap' treatment to non-Lilly assets--appears to be gaining ground.

If VPoC delivers, no doubt GSK will follow suit--and it probably won't be the only one.

image by flikrer NgKKh used under a creative commons license

Musings on Payer-Pharma Relations

c.morrison@elsevier.com (Chris Morrison) — Wed, 14 Oct 2009 08:33:02 PDT

This fall’s Academy of Managed Care Pharmacy’s meeting, which took place in San Antonio last week, seemed subdued, with fewer programs and attendees than in the past, likely a byproduct of the weak economy.

Lack of buzz didn’t change the AMCP’s penchant for showcasing the tense, yet symbiotic dynamics between payers and pharmaceutical manufacturers, however. It’s a meeting where pharma manufacturers sponsor satellite sessions and symposia led by top clinicians on new and evolving biologics, even as managed-care thought leaders, speaking in neighboring rooms, educate rapt pharmacists and managed care professionals on how to limit or control use of brand-name drugs.

The juxtaposition, although not new, continues to fascinate. The crux of managed care’s position was summed up in a session, “Value Analysis of New Medications – 2009 Update,” which is this year’s take on the value of the scientific data supporting newly approved NMEs. Its presenters’ conclusions: hardly any drugs came to market in 2009 with acceptably reliable data to back their clinical efficacy or safety claims.

RegenceRx, which did the analysis, is the technology assessment arm of The Regence Group, an affiliation of five Western health plans. Overall, less than 10% of studies submitted to Regence for formulary decision making are what the group defines as “reliable,” said Helen Sherman, RegenceRx’ Chief Pharmacy Officer, who, along with Laurie Wesolowicz, a director of pharmacy clinical services at Blue Cross Blue Shield of Michigan, has been enlightening AMCP members on the data surrounding the latest new drugs for several years. And only about 10% of new drugs make it onto Regence formularies, she observed.

Among the most common flaws in pharma studies: lack of blinding, small sample size, high drop-out rates, and endpoints with uncertain or unknown clinical meaning, Sherman pointed out. The findings weren’t shattering—RegenceRx has been delivering a similar message for several years now. But the build up, now, just as in years past, was a stark reminder of how big the gap is between what payers want and what pharmaceutical manufacturers provide.

To be sure, drug companies are starting—ever so slowly--to change their approach, and Sherman points out that several have asked RegenceRx to provide feedback on clinical trial design – for a reality check, not an assessment of the cost benefit ratio. But the results of their latest efforts won’t be seen in the market for at least five years. Read: Don’t expect much substantial change in data quality in the near term.

Now, RegenceRx is to managed care what a key opinion leader is among physician groups: it leads the way, while the rest of the flock follows. That is, most managed care organizations rely on much less sophisticated supporting analysis when they make formulary decisions. Still, in general, plans are getting better: if interest in particular AMCP sessions is any indication, the managed care industry is training a new generation of pharmacists who are also seasoned evaluators of clinical trial data.

Drug makers are fighting back, of course: they’ve got rebates, patient assistance programs and, perhaps, are taking hesitant steps toward pay-for-performance contracts. The latter would be a particularly big step because it is defined by collaborations among historically mistrustful parties, which share few goals. After all, only last fall at AMCP, the chief medical officer of Express Scripts, when asked, dismissed emphatically the idea of a role for pharma in his company’s fine-tuned efforts to improve patient compliance with medication regimens.

This year, in what may or may not signal a subtle change in tone, AMCP featured two panels focusing on payer-pharma partnerships. One was a case study of a coordinated effort by AstraZeneca and Molina Healthcare to improve appropriate use of PPIs. The second was a more general view of the promise and pitfalls of such relationships. Both ended on a straightforward message that more of these types of activities are coming. (For a discussion of how pharma-payer relationships are evolving in Europe, see July IN VIVO Pricing Experiments: Pharmas Get Creative in Germany) and also see (The RPM Report's Feb. 2009 issue, The Cost Sharing Solution: The New NICE Ticket.)

Plenty of challenges linger before such agreements become common, if ever. Without truly innovative, effective new drugs, pharma’s hands are somewhat tied. And payers, for their part, are concerned that, even as they use more generics for basics, the prices of proprietary drugs they need – and their medical costs overall – will go through the roof. But at the moment, both sides seem to agree the current pricing structure has to change. What that change involves and who gives and gets what is up in the air.

image by flickr user jvverde used under a creative commons license.

AZ's Dave Brennan: Personalization & Partnership... & Business Implications

c.morrison@elsevier.com (Chris Morrison) — Wed, 14 Oct 2009 01:23:50 PDT

Each year, the Cleveland Clinic puts on a Medical Innovation Summit focusing on a specific therapeutic category. This year the subject was cancer – though its business speakers focused their remarks more broadly.

On October 5th, the Summit’s opening day, we had the chance to interview two of the featured speakers – Dave Brennan, CEO of AstraZeneca, and Dan Vasella, the CEO of Novartis.

Today, we’ll show you our discussion with Dave, which followed his talk (here’s a link to the text) focusing on the triple themes of personalization, partnerships (which is to say: externalization), and policy.

Our conversation (and the questions from the audience) went far beyond those subjects, however. To see and hear it, click here.

Vanda/Novartis: ... And the Circle of Life is Complete

c.morrison@elsevier.com (Chris Morrison) — Tue, 13 Oct 2009 04:16:47 PDT

The surprise approval of iloperidone (Fanapt) earned back in May by Vanda Pharmaceuticals had a lot of people (OK maybe just us?) scratching their heads to come up with comparable instances of molecules that were dumped by pharma and eventually made it to market. Like our lion king friends here, they also had to crane their necks to see where Vanda's stock price went.

Sure there are some ex-pharma molecules that wind up getting on the market (you helped us come up with half a dozen or so), but there aren't a lot. And that's a fact that biotechs eager to in-license discarded pharma assets needed to reckon with.

Vanda's unlikely success with iloperidone continues. Last night the biotech announced it was selling US/Canadian development and commercialization rights to Fanapt back to Novartis, for $200 million, plus milestones and royalties. It's the circle of life!

Novartis is now responsible for the drug's development in the US and Canada, "including the development and commercialization of a long-acting injectable (or depot) formulation of Fanapt," says the release. Vanda keeps rights to both formulations outside of those territories and will pay Novartis a royalty, though Novartis has an option to negotiate for those rights. Vanda investors like the deal--the company's stock is up again (this time only 35% or so).

As a reminder, here's the molecule's long and colorful business development history: In January 1997, Hoechst licensed the drug to now-tiny Titan Pharmaceuticals. Titan turned around later that year and licensed the drug to Novartis. Novartis and Titan ran into trouble in Phase III when the drug was shown to cause QT prolongation; Vanda took on development of the drug in 2004, and received the Not Approvable letter from FDA last July. The FDA's 180-degree shift to APPROVED came in May 2009.

Has Novartis pulled off the old don't-want-it-oh-wait-actually-we-do-want-it before? Yes, with Speedel Group's Tekturna renin inhibitor for hypertension. That deal was a little bit more straightforward, and certainly designed with the claw-back in mind (Novartis eventually bought out Speedel for nearly $900 million, so it was more expensive too).

Iloperidone may not be the kind of asset that pushes Novartis to snap up all of Vanda in the same way. But after this drug's twists and turns, you'd be crazy to rule it out.