The End of Generics as We Know 'Em

Generics is a dying industry, according to Claudio Albrecht, ex-CEO of generics group Ratiopharm. Never mind the wave of patent expiries causing so much sweat at Big Pharma, or the cost pressures leading governments and payers everywhere to promote generic usage. The sector, as traditionally conceived, must change or be no longer.

Albrecht’s talking about oral, small molecule generics. He’s talking about pills like simvastatin, which cost just pennies and are now commodities, soon to be dominated by high-volume price-dumpers. The future, Albrecht declared at a recent London conference organized by investment bank Bryan Garnier, is in hard-to-make generics and biosimilars, as branded drugs increase in complexity—and as branded players get smarter with their lifecycle protection strategies.

“Innovative products are the future of generics,” he hailed, somewhat contradictorily. But if you think about it, the top selling patented drugs, after the forthcoming round of expiries, will be biologics. So the traditional small molecule generics companies need to learn, fast, how to develop and sell them. Otherwise, in 5-7 years, “the generic industry won’t have an answer.”

By then generics will be a device business, too—more and more drugs will be injectable, and/or require some kind of delivery system. Look at insulin—it’s all about pens, that’s really how Novo and others have protected their franchise and will continue to do so, most likely, despite no substance IP. The increase in product complexity will ultimately lead to targeted therapies—and probably no generics at all as a result.

Big Pharma, struggling to find and fund ‘new’ drugs as traditionally defined, are cottoning onto this changing universe. Hence some are making moves (in some cases back) into generics, mostly hard-to-make injectable generics (look at Sandoz’s €925 million cash acquisition of Ebewe in May) or biosimilars and follow-on-biologics (remember Merck/Insmed) further blurring the boundaries between the innovative and generic sectors as a result.

Where does that leave the traditional generics guys, though? It’s not so easy for them to jump into R&D—most spend far too little to even hope to compete in the new world of complex generics with their likely lower substitutability and higher margins. Ratiopharm and Actavis are up for sale. Most of the others that spend less than $200 million a year (compared to over $650 million for Teva or Sandoz) will have to re-invent themselves, too.

Meanwhile if the challenge of increasing product complexity’s not enough, health care reform in Europe’s largest market ,Germany, has already radically changed the game for generics firms. This was a comfy branded generics market where high prices allowed firms to fund doc-focused sales forces. No longer. Payers now rule the roost and determine, through highly competitive price-based tendering, whose generic version will be dispensed in pharmacies for the following two years, shutting out the losers entirely. (See our forthcoming IN VIVO feature for more on how such contracts are spreading to patented drugs, too.)

Small wonder that Betapharm, and others, have fired all their doc-focused sales forces. Generic prices have fallen 30% since 2005 in Germany, a slide that will continue.

So who will be the winners in the new generic world-order? Not necessarily the small molecule lot that have honed their first-to-file skills. Teva and Sandoz, having invested in biologics and manufacturing, are well-placed.

But, less obviously, so are smaller players like UK respiratory-focused Vectura, formulation experts, sitting slap bang in the middle of these converging innovator and generics spaces: the company has two deals on value-added generics with Sandoz, as well as a tie-up with Novartis around a proprietary drug formulation, and a device deal with Boehringer Ingelheim.

While You Were Summering

The International Conference on Alzheimer's disease kicked off this weekend, so we've got some Alzheimer's news (and really little else) in your weekend wrap below. ICAD's becoming more prominent on the calendar ... maybe IN VIVO Blog should go next year. What's that? It's in Hawaii next year? Oh you don't say.

Meanwhile we continue to digest the Effient approval (your # of f's may vary), the Phillies wrapped up a 9-1 homestand to cruise into the all-star break, and a few of your IVBers are mere days from taking some much-needed vacation time (things may be quiet around here for a few weeks, though surely not dormant).

While you were enjoying the sunshine ...

• Does Bayer have an Alzheimer's disease diagnostic on its hands? Phase II data reported on Sunday look promising, reports Reuters.
  
• Bloomberg reports on company-funded study: GSK's Avandia not going to make a dent in Alzheimer's.
  
• Massachusetts experts, funded by stimulus cash, playing a big role in rollout of electronic medical records, says Boston Globe (h/t Michael_Gilman)
• Fish oil pills. Study suggests you're going to have to keep enjoying them just for the taste.
• Another $1 billion in US cash going toward buying swine flu vaccine, HHS Sec. Sebelius said on Sunday. Meanwhile, why should the vaccine makers have all the fun? You too can cash in on swine flu, with a, er, viral catchy Youtube video: $2,500 for the best flu PSA!
• Meanwhile plans are being drawn up to vaccinate the entire UK population, reports ITN.
• Early this morning Genentech and OSI said that further analysis of a Phase III study suggested Tarceva improved overall survival in advanced NSCLC.
  
• If you're running the NYC half-marathon August 16th, or would like to, the Fresh Air Fund is looking for racer/fundraisers.

image from flickr user pictalogue used under a creative commons license

DotW: Singing in the Rain

It's raining cash! Hallelujah, it's raining cash!

Forgive us our exclamatory punctuation, but we had a Gene Kelly moment given the number of financings announced this week. From planned follow-on public offerings by Arena and Xenoport to Jazz's private placement to additional fundraises by start-ups Viamet, Taiwan Liposome, Intellikine, and Zosano, it did seem as if the financial heavens opened, raining manna upon the starving in our industry.

Vertex managed to get in on the action, too announcing this morning its intention to sell the future milestone payments associated with the filing, approval and launch of its first-in-class protease inhibitor telaprevir in Europe? (We're still a bit bemused by the pre-deal press release, but admit to being easily confused.)

In any event, this is the kind of rainy weather designed to put smiles on the faces of biotech CEOs. (A far cry from the kind that had some in the Northeast signing up for DIY ark building classes at the local Home Depot.)

It's also raining positive data--at least for Amgen and Rigel. Amgen's stock tipped up on news that the key to its future, denosumab, appears to be superior to Novartis’ Zometa in a Phase III head-to-head study in breast cancer-linked bone complications. And Rigel is positioning itself for a future edition of DOTW after reports that its oral rheumatoid arthritis drug showed positive results in mid-stage trials. (Amylin also annouced positive trial results for its mid-stage obesity drug, but investors didn't swoon on the news primarily because of the delivery challenges associated with a twice-daily injectable.)

This just in: it's raining approvals too. Regulators approved Lilly/Daiichi's anti-clotting drug prasugrel, which will be marketed (effectively we assume) under the name Effient.

Meantime Big Pharma and Big Biotech must be pleased with the innovator friendly proposal by Ted Kennedy this week for a follow-on biologics pathway that includes 13.5 years of exclusivity (What happened to Piven and 10 years?), while believers in personalized medicine see the positives of Francis Collins as the leader of the National Institutes of Health.

What else happened this week? Just a little write-up we like to call


Merck/Portola: Portola is another company soaking up the cash this week, thanks to its deal with Merck for the Phase II Factor Xa inhibitor betrixaban. According to the terms of the deal, announced July 9, Merck will pay $50 million upfront for betrixaban, plus another $420 million in milestone payments and double-digit royalties. It’s the second major collaboration this year for the privately-held Portola. In February, Novartis paid $75 million upfront for rights to the biotech’s anti-thrombotic elinogrel. As news of the Merck deal and it biobucks surfaced, one of the central questions was whether Merck had gotten a relative steal. Recall that Pfizer paid BMS $250 million upfront for a 50% share of the competing molecule apixaban back in 2007. In fairness to Portola, its molecule is at a much earlier stage of development compared to apixiban. Also Merck is picking up 100% of the development costs of the program (Pfizer is paying 60% of apixaban’s R&D costs, while the two pharmas jointly split profits/losses and worldwide commercialization costs.) That’s a real boon for the biotech, given that Phase III trial costs could easily run to $350 million or more. Portola has an estimated $175 million on its balance sheet after the Merck deal and won’t need to hunt for additional capital anytime soon. But if financing risks are off the table, the company’s venture backers, which include Frazier Healthcare Ventures, Alta Partners, and MPM Capital (among others), are still in the hole and waiting for their exit. (The company has raised an estimated $200 million in venture money and another $20 million in debt since its 2003 founding.) And with the company’s two major programs partnered, the pool of potential acquirers has effectively shrunk to Novartis and Merck, who are now waiting to see how elinogrel and betrixaban pan out in later stage trials. With "two, multi-billion dollar products," Portola could be well-received, but for the foreseeable future, the market is "amazingly challenging," Frazier Healthcare Ventures’s Alan Frazier said in an interview with “The Pink Sheet” DAILY.--Ellen Foster Licking and Emily Hayes

MedImmune/Catalyst: Privately held Catalyst Biosciences remains in the news , announcing its second discovery and preclinical development deal in as many weeks. Hot on the heels of Catalyst’s June 30 tie-up with Wyeth to develop Factor VIIa therapeutics for hemophilia, Catalyst and AstraZeneca's MedImmune are working together on an undisclosed target in the autoimmune and inflammatory disease space, with MedImmune holding an option to expand the work to a second target any time during the deal’s three-year term. Financial terms were not broken out, but Catalyst says it could realize $195 million in upfront licensing fees and milestones during the life of the deal. In addition, MedImmune will fund an undisclosed number of full-time research personnel at Catalyst and will pay royalties to the biotech for any product arising from collaboration that reaches the market. As is typical in these kinds of arrangements, Catalyst will be responsible for discovery and early-stage research, and then turn the molecules over to MedImmune for further development. The deal illustrates AstraZeneca/MedImmune’s desire to expand biologics efforts beyond antibodies. Catalyst, after all, has developed a next generation protein engineering platform to create souped-up proteases called Alterases that are designed to degrade or modulate proteins involved in hemophilia and inflammatory disease. With these two recent tie-ups, Catalyst is likely to remain off the Deals of the Week page for some months to come, unless a significant opportunity arises. "We won't do any small deals at this time because we're full-up, plus we have our own internal programs," Usman said in an interview with "The Pink Sheet" DAILY.--Joseph Haas

iZumi/Pierian: It's also raining stem cell news due to this week’s International Society for Stem Cell Research meeting in Barcelona. An early announcement came from iZumi Bio, which has merged with a still-mostly-conceptual outfit out of Harvard called Pierian to create iPierian. As part of the merger—terms were mostly undisclosed—Pierian backers MPM Capital and FinTech Capital Partners are investing $11.5 million in the new company, Pierian’s founders (Harvard faculty members George Daley, Doug Melton, and Lee Rubin) are joining the company’s SAB along with three other Harvard stem cell scientists, and Corey Goodman (Pfizer’s former BBC chief) will become the combined groups’ chairman. MPM’s Ashley Dombkowski will join the company’s board. The company aims to apply its cellular reprogramming technology to create in vitro models of disease that can be used, as a first step, to discover small molecule treatments for neurodegenerative diseases like spinal muscular atrophy and amyotrophic lateral sclerosis. We’ll have more to say about iPierian’s induced pluripotent stem (iPS) cell technology in the next issue of Start-Up. For now, suffice it to say that between these guys and Fate Therapeutics we might have a new Alnylam/Sirna thing going on in the iPS cell space. --Chris Morrison


Shionogi-Sciele/Victory Pharma: Ugly. In mid-May Shionogi’s Sciele announced it was purchasing the privately-held pain specialist Victory Pharma for $150 million. But on July 10, in a tersely worded press release that was short on details but long on mystery, the two companies announced they were terminating the proposed tie-up. The news is a blow to Victory’s backers—Ampersand and Essex Woodlands—who had committed $45 million to the company back in March. (Essex's cash-on-cash return likely wasn't what it wanted, but as we noted in a previous edition of DOTW, the internal rate of return (3x in just a few months) would have been most impressive. What scuppered the deal isn't clear -- “an unforeseen development that occurred after the agreement was signed,” says the press release. So we'll speculate a bit and hypothesize that changing views at the FDA about the potential dangers of acetaminophen and NSAIDs had something to with the deal's collapse. Victory markets Naprelan, the only branded, once-daily sustained release formulation of the NSAID naproxen. And it's in the final stages of securing approval for a new tablet strength version of Naprelan, with an anti-nausea medicine in pivotal trials. In addition to Naprelan, Victory also markets Fexmid and two acetaminophen containing products, Dolgic for tension headaches and Xodol, a combination hydrocodone/acetaminophen product for pain. On June 30, an FDA advisory committee narrowly ruled to recommend the removal of acetaminophen from combination prescription and OTC products. Both Dolgic and Xodol would appear to be affected by the new recommendations, but the fall-out in terms of market potential is likely worse for Xodol since the potential for abuse of the hydrocodone-only containing drug means it will be subject to stricter prescribing limits and potentially a REMS under the new guidelines. And the rug might be pulled out from under Naprelan as well. FDA continues to refer to the "hazards of NSAID products" and recently started requiring REMS for new brands of diclofenac products.--EFL

AstraZeneca/MAP Pharmaceuticals: Poor Map Pharmaceuticals. Shares of the biotech fell 16% and then rebounded Thursday July 9, after partner AstraZeneca announced it was pulling out of their collaboration on the planned development of the pediatric asthma drug budesonide. Recall that AZ and MAP are still newlyweds. Thinking the MAP drug could extend its own budesonide franchise, Pulmicort Respules, the Big Pharma ponied up $40 million upfront and promised biobucks in the $750 million range in late December 2008. The end of the deal isn’t all that surprising: in February, MAP revealed the drug had failed to meet the main goals of a late-stage trial in children with mild asthma. But the obits for the drug—if not for MAP—were swift. “The drug is essentially dead,” Wedbush Morgan Securities analyst Liana Moussatos told Reuters. Analysts like Moussatos expect the news won’t permanently cripple Map, mostly because of promising results associated with the biotech’s orally inhaled migraine drug Levadex, which is in late stage clinical trials. That medicine is still unpartnered and the company has been careful not to speak publicly about any potential future deal other than to say there has been “strong interest from people in the migraine area.” But with an estimated $67 million in cash and a quarterly burn rate of around $16 million, there is pressure on Map to ink a deal for the migraine product sooner rather than later.--EFL

What's a Biodollar Worth? Let's Ask Vertex

Vertex announced this morning that it intended to sell (to an unnamed buyer) its future milestone payments associated with the filing, approval and launch of telaprevir in Europe.

Those milestones would be paid out by J&J, which licensed European rights to the HCV protease inhibitor from Vertex in 2006, and could total $250 million: $100 million for filing and approval of the molecule, $150 million for launch. (It's not clear how these break down--launch in heterogeneous Europe is obviously different than launch in the US, for example.)

But what are they worth right now? Vertex isn't saying yet, but sooner or later we'll get another datapoint to help us determine the elusive dollar-to-biodollar exchange rate.

Of course telaprevir isn't an early stage molecule; it's in Phase III trials and predicted to be the first HCV protease inhibitor on the market. So the value of biodollars associated with telaprevir is going to be much different than the value of those associated with earlier-stage alliances. But there remains an element of risk, to be sure. Even promising Phase III drugs implode from time to time.

Vertex has demonstrated a flexible financing strategy over the past couple years. Last year the company netted $160 million from the sale of its royalty stream on the HIV therapies it co-discovered with GSK. And in between the royalty sale and today's announcement Vertex raised some $540 million through equity offerings; clearly the company doesn't have trouble bringing in cash through more traditional means.

So why monetize the JNJ milestones now? Because drug development is damn expensive, and even for a company like Vertex, cash is king.

At the end of the first quarter the company had about $870 million in cash and nearly $300 million in debt (about half of which it has since converted to common stock). But it also burns through cash pretty quickly, and by our back-of-the-envelop calculation that's lately to the tune of about than $125 million in the average quarter, and that's without expenses related to the acquisition of ViroChem or any other deal Vertex wants to pursue. So until telaprevir sales start coming in, even a net cash position of more than $600 million won't last the company very long.

The math isn't our strong suit and we'll update if and when we hear back from Vertex.

UPDATE: No official word from Vertex but we think our rough calculation is in the right ballpark. We should also note that this isn't a done deal, and when it does close we'll be able to see for ourselves the current value of these future milestones.

Forbes' Matt Herper brings up an interesting point on his twitter feed, and we think he's only half facetious: Will, he asks, the Vertex deal lead to hot trading in biobucks derivatives?

We think though it's certainly possible this isn't the last milestone monetization deal we'll see (and probably isn't the first either, though can't think of any off the top of our heads) it's hard to imagine that the royalty and synthetic royalty buyers--who would be the logical buyers here too--would allow the mission creep into the earlier and riskier development stages that would make any serious market possible. Those guys get edgy buying future royalties for registration-staged projects, much less Phase III or even earlier. That risk would mean seriously low prices paid for most milestone packages. Sure we may see a few more telaprevir-style deals, but that's probably it.

We could be wrong. What do you think?

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

D-mab Trumps Zometa With Top-Line Cancer Results

Amgen last night released top-line results from a Phase III head to head study pitting its most important future drug, denosumab, against Novartis’ Zometa in breast cancer-linked bone complications.

The results look good—better than most expected. Denosumab appears to be not simply non-inferior to Zometa (the primary endpoint of the study) but superior to Novartis’ incumbent drug—itself pretty potent--in terms of delaying the time to first and subsequent skeletal-related events.

Deutsche Bank’s Mark Schoenebaum describes these efficacy results as a “best-case outcome”, having himself put the odds of the drug’s showing superiority at just 40%. (Overall survival and time-to-progression were the same for the two drugs.)

All this matters much to Amgen. The Big Biotech’s relying more heavily than is comfortable on this single late-stage compound to secure its future growth and independence. (Remember, its EPO- and cancer-focused base business is in steady, irreversible decline.) And although the drug is widely expected to be approved for post-menopausal osteoporosis first, likely in October this year, the cancer indication could be worth just as much—about $1.5 billion in peak sales--according to some analysts.

And cancer’s what Amgen knows about—it already sells Neupogen, Neulasta and Aranesp. The Big Biotech has absolutely no experience in PMO, a complicated, busy market dominated by cheap oral generic bisphosphonates. There’s widespread skepticism about the drug’s commercial potential in this indication as a result; DB reckons the drug could capture 10-20% of the market at peak (it’s a big market, mind you: $8 billion).

Schoenebaum in May described the outcome of this Phase III cancer trial as biotech’s “biggest data event” for 2009. (The d-mab PMO data released last year—also better than expected—may well have been 2008’s “biggest event”, too, mind you) Full efficacy and safety data from this breast cancer trial will be presented at a meeting later this year, and results from a second Phase III study in advanced solid tumor/multiple myeloma patients (there are four in total) are also due before year-end.

The probability of superiority in this second trial, plus another in prostate cancer due to report in 2010 has now risen, according to analysts at Leerink Swann. And when it comes to potential oncology indications, Amgen’s not leaving any stone un-turned: it recruited 11,000 patients for its d-mab cancer trials, out of a total of 19,000.

Look out Novartis, then. The Swiss group has enjoyed dominance of the SRE market since Zometa’s approval in 2001, with almost $1.4 billion in worldwide 2008 sales. It quickly displaced (Novartis’ own) Aredia, another IV bisphosphonate, thanks to a shorter infusion time, but d-mab’s subcutaneous delivery will likely trump that.

And it doesn’t look as if Novartis will have much safety ground to stand on, either. Indeed, the drug’s growth has recently stalled in part, says Schoenebaum, because of concerns over osteo-necrosis of the jaw (ONJ), kidney toxicity and efficacy beyond two years. The d-mab data suggests, according to Amgen's PR, “no statistically significant” difference between the rate of ONJ in the two treatment arms, equally “balanced” rates of infectious adverse events (an initial concern with d-mab) and an overall incidence of events “consistent with what had previously been reported for the two agents.”

All the same, since Zometa goes generic in 2013, and there are already some filings, Amgen will have to move fast to translate this apparently starry trial data into equally sparkling sales growth. Payor pressure means even a ‘superior’ drug may struggle if generic IV bisphosphonates get cheap enough. (Leerink Swann expects Amgen to price d-mab higher than the $12,000-p/a Zometa.)

image by flikrer robinbyles used under a creative commons license

Lobbying and Health Reform: Reading Between the Lines

Part of the fun in reading the national news section of The Washington Post has always been the deciphering – trying to figure out who an unnamed source might really be or trying to find hidden meaning in a certain quote.

By that standard, the Post’s July 6 front-page article on the significant presence of Capitol Hill insiders among the multitudes lobbying Congress on health care reform was a veritable goldmine, especially for followers of the pharma/biotech industry.

One portion of the article details the number of former aides to Sens. Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa), respectively the chairman and ranking minority member of the Senate Finance Committee, who have been lobbying that committee and others in Congress on various facets of health care reform. No fewer than seven of Baucus’ and five of Grassley’s former aides are among the hundreds of health care industry lobbyists currently trying to shape health care reform.

Particularly wielding the influence, it appears, is the bipartisan lobbying shop Mehlman Vogel Castagnetti, which includes both Baucus’ former chief of staff David Castagnetti and Grassley’s former health policy adviser Colette Desmarais. According to a nifty full-color chart offered by the Post, both Castagnetti and Desmarais represent 10 clients in the health care reform battle, among them six pharmaceutical or health care products companies, two HMOs and two hospital/nursing home associations.

Not to be outdone, there is Barrett Thornhill, listed as a former health policy legislative assistant to Finance Committee member Sen. Michael Crapo (R-Idaho). Thornhill, a lobbyist with Foley Hoag, represents 13 different pharmaceutical and health care products companies in his work. (Though we wonder whether Thornhill's client list doesn't reflect his most recent job at the Biotechnology Industry Orgranization, rather than his past connection to a minority member of the Finance Committee.)

Eager to prevent any sense that Baucus, Grassley and co. might be influenced by this phalanx of former aides in crafting their version of health care reform legislation, Baucus spokesman Scott Mulhauser helpfully told the Post that Baucus and staff meet daily with people representing the full spectrum of stakeholders in the health care reform effort. “The senator and his staff … are proud that all interests are treated equally and that no one receives special treatment of any kind,” Mulhauser is quoted as saying. “As a result, the Finance Committee has been praised by members of Congress and by the media for its uniquely inclusive and transparent health-care reform process.”

No, we wern't aware either that the Post now is reprinting press releases.

In fairness to Baucus and Grassley, they have been very open in releasing white papers and options drafts outlining possible directions for reform. Its just that it sure seems like some stuff is going on behind close doors, like hammering out $80 billion in savings from the pharmaceutical industry to help fund the cost of reform.

Which leads us to our favorite part of the article, a priceless quote by PhRMA head Billy Tauzin, responding to critics of his decision to join the trade group shortly after helping shepherd the 2003 Medicare Modernization Act, which created the Part D drug benefit, through Congress.
“Is it a distortion of baseball to hire coaches who have played baseball? Is it a distortion of universities to hire from academia,” Tauzin asked rhetorically in the Post piece. “The bottom line is that people work in fields in which they have experience. Somehow there are people who think that’s unusual for politics, but I think it’s pretty normal.”

Well, as the Post likes to say in its advertising, “if you don’t get it, you don’t get it.”

— Joseph Haas

While You Were Pursuing Happiness

To the tripartite inalienable rights of life, liberty and the pursuit of happiness that are enshrined in the US Declaration of Independence let us add a few as you re-enter the working world after a long holiday weekend. We hope your BBQs were delicious, your weather warm, and your blackberries silent.

While you were exercising the right ...

• To Boast: Ipsen tells Bloomberg: we have too many drugs to develop. Oh, poor Ipsen.
  
• To Post: Not everyone took a long weekend: IN VIVO Blog posted Deals of the Week and our take on the EU approval of Novo's Victoza/liraglutide on Friday.
  
• To Defend: Sanofi's latest long-term Lantus safety news: the drug is no worse than insulin when it comes to causing retinopathy (reuters).
  
• To Argue: The NYT reports on the state of the health care debate in Maine, where two moderate republican senators are besieged by pro- and anti- public plan camps.
  
• To Make Fun of Quackery: Homeopathy hilarity from Mitchell & Webb (h/t Pharmagossip)
• To Embroider: We were pulling for Roddick in the Wimbledon final and would have been very happy had he won. Not that we were anti-Federer. No, we didn't become anti-Federer til he whipped out that jacket with "15" on the back.
  
• To Sweep: The Phils took three off the Mets to hopefully put the past few weeks of poor play behind them.

image by flickrer myoldpostcards used under a creative commons license.

Novo Hopes Victoza’s EU Clearance Bodes Well for US

As the European Commission today gave its final green light to Novo’s much-anticipated GLP-1 inhibitor liraglutide (Victoza) (no surprise, given the CHMP’s positive recommendation back in April), the company’s still bullish on the drug’s prospects in the US—anticipating not only approval but a none-too-severe risk-management plan as well.

“Our expectation is that the whole post-marketing system that we’ll agree and adhere to in the US will not be of a severity that will be commercially destructive to the product, not prohibitive for easy daily use in the doctor’s surgery,” Novo’s CMO Mads Thomsen told us (but enough, one assumes, to give practitioners comfort and get a leg in versus Byetta…).

Thomsen’s taking heart, perhaps, from the squeaky clean EU approval, which came with no usage restrictions and no contra-indications—despite an earlier split vote from an FDA advisory committee in April over whether Victoza should be approved in the US at all, due to increased cases of thyroid tumors seen among rodents.

The European authorities apparently liked the sound of Novo’s commitment to undertake a global, 9000-patient, five-year post-approval cardiovascular outcomes trial, including not just the classical MACE analyses of CV risk, but also various thyroid-related parameters, according to Thomsen. “The plan is to have the study protocol negotiated with the FDA as well [as the Europeans] by year-end,” he told The IN VIVO Blog—and to start recruiting a couple of months later.

So does that mean US approval’s likely before year-end? Not all analysts are that bullish, given the challenges of monitoring any potential thyroid risk in humans (though the worst-case scenario for some, a black-box warning, doesn't necessarily kill sales--just look at Actos). But as far as Thomsen’s concerned, yes, “we’re assuming that either we have US approval by then, or that we’re so far down the regulatory process that the CV study design will be part of the discussions,” he continues.

Novo’s in a hurry because liraglutide is already late (speed-to-market hasn’t always been Novo’s strength, as we reported in more detail here, although product quality has more often than not made up for this). Lilly/Amylin’s long-acting Byetta (taken once-weekly vs once-daily for liraglutide) is close on Novo’s heels, and these companies, unlike Novo, have an existing GLP-1 platform to build on.

Still, Novo’s going to do its damnedest to leverage its own insulin sales force to get liraglutide out as quickly as possible to a broad prescriber base, says Thomson. Not unusually, the UK and Germany, two of Europe’s largest markets where up-front pricing is free, will be the starting points. “We’ll make some minor adjustments to sales force size in Europe,” he says, “but we’re only talking an additional 100 or so.” Thomson says that a “sizable” part of the insulin sales force will be re-allocated to liraglutide, at least during the launch phase, as the company tries to capture what it hopes will be “positive perception of innovation” at Novo among diabetes drug prescribers.

It won’t just be the specialists, though: since liraglutide is easier to use than insulin (it doesn’t require blood sugar monitoring or dose titration), “we anticipate a broader prescription base [than insulin] and moving into the GP market within several months,” says Thomsen.

Liraglutide will be positioned as “the natural second-line therapy after metformin failure,” explains Thomsen, given its “superior clinical profile, effect on body weight and lack of hypoglycemia.” In this regard, Novo’s racing not just against Byetta and family, but against the (oral, and thus highly convenient, and cheaper) DPP-IV inhibitors, too—like Merck’s Januvia and, shortly, AstraZeneca’s saxagliptin (Onglyza), which last week received a positive EU opinion. Indeed, “the question is whether second-line therapy is liraglutide, or another oral therapy,” summarizes Thomson.

Novo’s leading position in the insulin market means it isn’t about to admit that liraglutide’s success will eat into its core franchise. But even if it does delay progression to insulin somewhat, Novo’s hoping the drug allows to it capture patients earlier on in the course of their disease. The idea is that pre-insulin diabetics become loyal Novo followers, “using our services and devices, and…that later on, when they go onto insulin, they’ll add [Novo’s basal insulin] Levemir”—and not Sanofi-Aventis’ competing Lantus—on top of liraglutide, explains Thomsen.

That argument might well be boosted by recent data—albeit still controversial—linking Lantus to an increased cancer risk, a link Novo is trying hard to ring-fence as a Lantus-specific problem, not one that affects all basal insulins.

For the next chapter in Victoza’s US story, we’ll have to wait until August 6th and Novo’s half-year results. The company in early June met FDA to talk risk-management and to discuss Victoza’s victorious performance in a gutsy two-year head-to-head trial versus Byetta. FDA "didn’t have access to this material prior to the [April] advisory committee meeting,” clarifies Thomsen.

In this trial, liraglutide also showed itself as “drug squeaky clean with regard to calcitonin levels compared to comparator drugs…” hence “the [US] regulators will also believe, like us, that the benefit-risk profile of performing invasive procedures to monitor patients’ calcitonin levels is negative,” asserts Thomsen.

Are you listening, FDA?

DOTW: Fireworks

Perhaps in honor of our nation’s birthday, the biopharma industry’s dealmakers got an early start on the festivities, announcing a steady stream of alliances that culminated in a show-stopping finale: Johnson & Johnson’s extremely interesting but complicated pact with Elan Pharmaceuticals.

That deal certainly provides Elan with some much needed capital and may quiet dissenting shareholders who have been advocating for change at the top of the Irish drug maker. In one fell swoop, it also makes Johnson & Johnson a player in a hot therapeutic area given its $1 billion u/f for ¼ of a potential blockbuster/potential bust. (See our previous blog post and coverage in this week's "The Pink Sheet" for more.)

The dollar value of the J&J/Elan tie-up certainly dwarfs other deals announced this week, but that doesn’t make the individual agreements any less interesting. Read on for more analysis.



Wyeth/Catalyst: It’s dealmaking as usual for Wyeth, certainly as far as biotherapeutics are concerned. This week’s tie-up with Catalyst for Factor VIIa hemophilia hopeful CB813—the partners’ second collaboration—pits the Big (soon to become Very Big) Pharma up against Novo Nordisk’s market leader in the space, NovoSeven. The Catalyst compound could be more potent and longer-acting than NovoSeven, which sold $341 million in the first quarter of this year. Compelled by the promise of this still-preclinical asset, Wyeth paid $21 million up front and may fork out more than $500 million in research funding and milestones—plus double-digit royalties. It will also fund 12 Catalyst FTEs. Three things to note: 1) Not all deals, even pre-clinical deals, are option-deals. Even GlaxoSmithKline, optioners-de-rigueur, admitted as much on a panel at this week’s Euro Biotech Forum in Barcelona. For all we know, Wyeth may have wanted an option structure, but with four interested parties (according to Catalyst) it probably didn’t have much choice. In this case, Wyeth takes over the program once it reaches the clinic. 2) The new Pfizer-Wyeth, committed as it is to biologics will present serious competition, both at the dealmaking table and commercially, in this large molecule space. Sure, NovoSeven is a minor part of Novo’s otherwise insulin-focused business. And Wyeth’s existing three-drug hemophilia franchise sells less, combined, than NovoSeven. But Wyeth/Pfizer will have serious commercial muscle—and international reach. 3) Let’s hope the change-of-control clauses are solid: Novartis Venture Fund has backed the biotech since 2004, and Johnson & Johnson’s VC arm, JJDC, invested in 2008 via Centocor. As for Wyeth’s own pending change of control: no issues, says Catalyst, because Wyeth’s R&D head Mikael Dolsten is taking the biologics reins at Pfizer.--Melanie Senior and Joseph Haas

Astellas/Maxygen: After pursuing strategic discussions with various parties since October 2008, Redwood City-based Maxygen has finally inked a deal. And it’s likely the outcome—a joint venture with Astellas focused on discovery, research, and development of multiple protein-based drug programs—isn’t exactly what the biotech’s senior management had in mind. Ever since September 2008, when Astellas signed a small deal with Maxygen for its CTLA4-Ig program—called MAXY-4—the Japanese drugmaker has been on a short-list of the biotech’s potential acquirers. But even though Astellas clearly likes Maxygen’s proprietary protein shuffling technology enough to want to deepen the relationship, it wasn’t so enamored with the platform that it felt compelled to buy the company outright. As part of the latest arrangement, Maxygen will contribute $10 million in cash and substantially all of its programs and technology assets to the JV in exchange for an 83% ownership stake in the newco. Astellas will also invest $10 million in the venture in exchange for the remaining 17% ownership stake. In addition, the big drug maker has a three-year option to buy out Maxygen's share of the venture at a predefined price that starts at $53 million and could go as high as $123 million, and will contribute up to $30 million of funding during that time period. The arrangement leaves Maxygen as essentially a holding company of financial assets including: 1) roughly $200 million in cash; 2) a 22% stake in privately-held biofuel specialist Codexis rumoured to mulling an IPO; 3) MAXY-G34, being developed for chemotherapy-induced neutropenia and Maxygen's most advanced clinical compound outside MAXY-4. —Ellen Foster Licking

Mylan/Biocon: Strong growth prospects for the global generic biologics space over the next decade are bringing together the world's third-largest generic drug maker Mylan and India's Biocon. The two signed a comprehensive deal June 29 that gives Mylan exclusive commercialization rights in the world’s major markets—including US and Europe—with Biocon sharing in the upside via a profit-sharing arrangement. Further financial details of the deal were scarce, as was color on the actual therapeutic targets. But Mylan confirmed the collaboration's primary focus would be in "monoclonal antibodies and complex biologics." This deal marks Mylan’s efforts to play catch-up in the ongoing biogenerics fray. Both Teva and Novartis, via its Sandoz division, are significantly further ahead when it comes to the creation of biogeneric drugs. Early this year, Teva significantly increased its biologics manufacturing capacity through a collaboration with Switzerland's Lonza group; meanwhile Sandoz continues to hold the lead in biogenerics launches, selling generic versions of epoetin alfa and human growth hormone. In a June 29 note on the transaction, Goldman Sachs analyst Randall Stanicky, said the collaboration positions Mylan ahead of an anticipated U.S. regulatory pathway, but predicted that bio-generics would not "contribute meaningfully until 2013" to the firm's bottom line. The deal also illustrates the growing profile of Biocon, which previously inked a collaboration with Abraxis for development and commercialization of a generic version of GCSF in addition to building a pipeline of novel therapeutic targets via in-house R&D and inlicensing.—Joseph Haas and Vikas Dandekar

Biogen/Acorda: On July 1, Biogen Idec agreed to develop and market Acorda Therapeutics’ multiple sclerosis candidate Fampridine-SR outside the U.S. in a licensing deal worth $110 million upfront and additional milestones totalling up to $400 million. In addition, Biogen will pay Acorda tiered double-digit royalties on ex-US sales of the product. If approved, Fampridine-SR could be the first oral drug that improves ambulation in MS patients; its likely to receive 10 years of exclusivity in Europe based on early conversations between Acorda and the EMEA. Biogen already has a strong franchise in MS courtesy of its flagship products, Avonex and Tysabri,which together generated $2.8 billion in sales for the company in 2008. Because Fampridine can be used alongside current treatments, the oral medicine “fits nicely” with its current portfolio of MS treatments, Biogen’s head of neurology Al Sandrock told “The Pink Sheet” DAILY. The deal also takes some of the sting out of recent events at Biogen, where in June dissent shareholder Carl Icahn, who is eager to break up the company, gained two seats on the board of directors after a year-long struggle. Prompted in part by the uncertainty surrounding Biogen's future, Acorda crafted a careful 'change of control' clause in the deal to protect its rights to Fampridine. Sources close to the negotiations note two specific events will have to occur to trigger the change-of-control: first, Biogen has to be acquired; and second, there must be a clear signal that its sales efforts on Fampridine are decreasing as a result of its acquisition. For instance, if Biogen’s new owner cuts the sales force support for Fampridine, Acorda has the right to negotiate a buy back of the product at a fair value.—Carlene Olsen

CombinatoRx/Neuromed: Nasdaq-traded CombinatoRx is merging with privately held Neuromed in an all-stock deal that, for now, gives each company’s investors a 50% piece of the action. But as Neuromed’s Exalgo hydromorphone candidate winds its way through the regulatory process, that balance may change. Exalgo was licensed to Covidien’s Malinckrodt subsidiary only a couple weeks ago and has a November 2009 PDUFA date. Neuromed is therefore hoping to see an approval milestone later this year and is eligible for royalties on the drug’s sales. This isn’t just an earn-out (or CVR, whatever you’d like to call it) for Neuromed; perversely CombinatoRx shareholders may benefit from a delay in the approval process. Neuromed’s backers will get 70% of the combined entity should Exalgo receive FDA approval by the end of this year. If the drug gets approved between January and September 2010, Neuromed’s backers will hold 60%. Approval between October and December 2010 means CombinatoRx shareholders remain in the majority with 60% of the shares, and no approval or approval after December 2010 means CombinatoRx’s backers get 70%. The combination will sport management from both companies and Neuromed’s current president and CEO Chris Gallen, MD, PhD, will hold those titles at the new incarnation of CombinatoRx. CombinatoRx shed the majority of its value last October after the failure of its lead osteoarthritis candidate, and then restructured in November. Since then it has essentially traded below the value of its cash on hand, making it a prime candidate for a reverse merger.—Chris Morrison

General Electric/Geron: There's no financial information associated with this deal, but we admit to being intrigued by the notion that GE and Geron are teaming up in the area of stem cells-based diagnostics. It's a triumph for Geron, which has struggled to turn this promising source of biological material into something monetarily more concrete, partly because of the politically charged atmosphere associated with stem cells, but also because the science is just so damned difficult. In addition to this most recent tie-up, 2009 has been a good year for Geron: it recently received FDA approval to begin the first human studies of an embryonic stem cell-based therapy for the treatment of spinal cord injuries. Phase I studies are scheduled to begin this summer. The GE deal also shows the continued interest by big industry players in these most changeable of cells. Drug makers with collaborations include Pfizer(Wisconsin Alumni Research Foundation (WARF), University College London), GlaxoSmithKline (Harvard Stem Cell Institute), Novartis (Epistem), and Novo Nordisk (Cellartis). Just as one of the first uses for genomic information was the use of biomarkers to enable drug discovery, its not too surprising to see tools players looking at the cells as a potential source for developing tests that help predict a particular drug's toxicity. Indeed, GE may be playing catch up with Invitrogen, which formed a stem cells business unit last year, and has a deal with WARF to use hES to develop new research tools.-EFL

(Image courtesy of flickr user Mr Magoo ICU used with permission via a creative commons license.)

J&J Buys Elan Out of a Jam

Elan sent up a signal flare five or six months ago and now Johnson & Johnson has come to its rescue, with a $1 billion stock buy and an innovative asset purchase agreement around Elan's most advanced Alzheimer's disease programs.

The result: this very interesting deal plus Pfizer's takeover of Wyeth creates a bizarre situation that we haven't seen before: one of the biopharmaceutical industry's most hotly anticipated and potentially valuable late-stage assets (if not THE most hotly anticipated and potentially valuable late-stage asset) and the broader program that created it will now have two brand new owners, which happen to be two of the biggest (if not THE biggest) pharma/health care companies in the industry.

Oh, and as of yet, there is absolutely no commercial agreement in place for what happens when and if the drugs that emerge from this collaboration get approved.

We'll have all the fun and juicy details and analysis later in 'The Pink Sheet' DAILY but allow us to sketch it out briefly here. Elan was between a rock (a bunch of debt it was going to have some trouble paying off, a recurring theme in the company's history) and a hard place (it needs to spend serious cash on its bapineuzumab Alzheimer's program with Wyeth--not to mention all its other R&D--if the company to be successful).

So it began a strategic review earlier this year and once a week rumors surfaced that so-and-so was going to buy the company, or a piece of the company, or its delivery/formulation business, etc. Now enter J&J, who gets $1 billion in Elan stock at about a 1/3 premium (an 18.4% stake in the biotech) in exchange for all the rights and obligations associated with its Alzheimer's immunotherapy program (AIP, which includes bapineuzumab). J&J will also get an Elan board seat.

J&J will ensconce those assets in a J&J Newco in which Elan will have a 49.9% stake. Importantly for Elan, the first $500 million in AIP expenses will be paid for by J&J: given Wyeth/Pfizer funds half of AIP's R&D cost that means $1 billion in expenses are racked up before Elan needs to spend another penny on bapi & co. After that, Elan and J&J split their half of the programs' costs and profits per the 51.1/49.9% structure in the J&J Newco (for which Elan will have two seats on a seven-seat board). The terms of the deal prohibit J&J from buying more Elan shares for five years.

Elan will pay off the lion's share of its debt (about 70% of it) and keep all its other programs, including its non-AIP Alzheimer's work. Elan CEO Kelly Martin emphasized on a call today announcing the deal that Elan would continue to invest heavily in R&D--in fact it would increase investment in certain situations.

Analysts on the Elan call were uniform in praising the deal. The market (so far) likes it too, with Elan shares up about 21% in early trading. Why not: J&J quickly and emphatically gets into an area where it had a stated significant interest (though at not an insignificant cost) and Elan gets out of a jam and keeps what could still be incredible upside, with a major hedge against ongoing risk. Though extremely promising, bapineuzumab has stumbled a little bit and is no sure-thing.

The deal's most intriguing wrinkle though is not what has been sorted out, but what hasn't. Elan and Wyeth's original April 2000 deal did not include specific provisions for a commercial strategy, details that the companies were scheduled to iron out in the second half of this year.

That responsibility will now fall to Pfizer and Johnson & Johnson, once their respective deals close later this year. Now there's a negotiation we bet will be very interesting.

image from flickr user andi used under a creative commons license