Hamburg for Lunch: The Commish Serves Up Another Helping of Personalized Medicine

For the second time in as many weeks, Food and Drug Administration commissioner Margaret Hamburg hit the lecture circuit to lay out the agency's vision on personalized medicine, though "vision" is perhaps too generous. Much of the speech, which left an unscientific sampling of attendees sitting near us hungry for actual content, was an apology for the agency's slow adaptation to the dawning era of more targeted therapies.

It wasn't all mea culpas and mushiness, to be sure. Speaking to a conference in San Francisco Monday, Hamburg said that her agency was on track to deliver draft guidance on biomarker qualification by the end of the year, an early step in creating a pathway for drug and diagnostic makers to bring more tailored therapies to market.

Introduced as "our friend Peggy" by conference host Steven Burrill, a San Francisco-based merchant banker and venture capitalist, Hamburg also acknowledged the difficulty in creating such a pathway, which will involve merging responsibilities that are now divided between two FDA divisions. "Personalized medicine in the treatment of disease equals the integration of drugs and diagnostics," she said. "It's clear we need to develop a consistent, integrated approach in the evaluation and regulation of products that comprise personalized medicine."

Close FDA watchers might have noticed the speech was at times verbatim to the talk Hamburg gave Oct. 26 during a personalized-medicine gathering in Washington ("The Pink Sheet" DAILY, Oct. 26, 2009.)

She made several conciliatory gestures to the conferees mainly gathered to discuss ways to make money from diagnostics. More than once she included investors among those who need to see "the promise of new therapies," and conceded that their "ability to realize their investments depends on what they see when they look at the FDA."

"Regulatory agencies are not known for openness, and FDA in particular has gained a reputation for being a bureaucracy-bound black box," she said. "And regulatory agencies are not known for being clear, but we need to be. Few runners would show up for a race without knowing the distance to the finish line."

(Not so business friendly, though, was the lunch menu just before Hamburg's speech that featured a build-it-yourself taco bar. For at least one lunch hour, slippery hand-held fajitas were a graver threat to business attire than an opaque regulatory process.)

After Hamburg's speech, she sat with conference host Burrill for a short Q&A session, which, far from illuminating the details of FDA's personalized medicine pathway, showed off Hamburg's question-avoidance skills. At one point Burrill asked whether industry taxes in the health care reform bills could diminish FDA's ability to raise future funding through its own fees. Hamburg's answer was brilliantly non-committal: "I think industry understands the importance of having a strong FDA. It's clear in the world we live in that success will have to be a partnership. It makes sense to me that we should have a funding stream that reflects industry understanding of the benefits of a strong FDA."

But at the end of the Q&A Hamburg seemed to shine a little light on comparative effectiveness. Burrill asked if comparative effectiveness was "a friend" to FDA (he likes to describe the world along friend/enemy lines, which makes In Vivo Blog wonder what he thought of the tacos at lunch). Would comparative effectiveness become a way for FDA to regulate pharmacoecnomics, Burrill asked?

Here's what Hamburg said: "In our work to date we have a very clear legal mandate to examine safety and effectiveness of products, it's not compared to this or that. But the truth is, some comparative effectiveness knowledge enters into some of what we do" in labeling, recommendations for first line or second line, risk/benefit acceptance, and the number of drugs available in the space in question. She cited interest in new models the EMEA is considering to look at what she called "economic and value issues."

Hamburg also made a pitch for tighter coupling of FDA and the Center for Medicare Services, or CMS. "It really makes sense for us to create a system where there's more coordination and sharing of information and thinking earlier in the process... To have CMS more involved with FDA in a more collaborative way, to talk about products in the pipeline is something people have advocated for." - Alex Lash

Photo courtesy of the FDA.

Omnicare Settles Long Term Care Kickback Case; Is J&J The Real Target?

Now that federal health care fraud prosecutors have broken the billion dollar barrier in recent settlements, the conclusion of a $98 million settlement with long term care pharmacy provider Omnicare may not have caught your eye. And the simultaneous announcement of a $14 million settlement with Ivax (now part of Teva) for its dealings with Omnicare seems almost quaint. (Read our coverage in The Pink Sheet here.)

Ivax is paying just one percent as much as Lilly did to resolve claims related to its promotion of Zyprexa ($1.4 billion) and only about half-a-percent as much as Pfizer did to resolve claims related to the promotion of Bextra and several other products ($2.3 billion).

It stands to reason, right? The Lilly and Pfizer cases focused on primary care marketing--indeed, the Lilly case was fundamentally about Lilly's efforts to redefine schizophrenia as a primary care market. Primary care is where the money is (or was, at least) so the government is sure to claim bigger fines when it prosecutes in those areas.

It may not be that simple. Omnicare may have settled for less than $100 million, but some of its business partners--including the biggest of Big Pharma--are still on the hook.

Because long term care pharmacy may be a relatively small slice of the overall pharma market, but it is a big piece for some products--and the share of costs paid directly by the government is much higher than in primary care. And, with the launch of Medicare Part D, the unique aspects of that marketplace started to attract a lot more attention, both from manufacturers, who discovered that the quirks of the Part D rules appeared to give long term care pharmacy providers a great deal of leverage in the marketplace, and from the government, which began to ask more probing questions about how exactly that market segment works.

As we reported in The RPM Report at the time, the run-up to Part D prompted a number of new investigations of pharmaceutical industry contracting practices.

And those investigations are continuing.

Where might the next shoe drop? Well, the US Attorney's Office in Massachusetts offers a big hint in its press release announcing the Omnicare settlement.

The United States contends that Omnicare solicited and received kickbacks from Johnson & Johnson (J&J), a pharmaceutical manufacturer, in exchange for agreeing to recommend that physicians prescribe Risperdal, a J&J antipsychotic drug, to nursing home patients. The Government contends that J&J’s kickbacks to Omnicare took multiple forms, including: market share rebates that were conditioned on Omnicare engaging in an “Active Intervention Program” for Risperdal; payments disguised as fees for the purchase of data; payments disguised as educational grants; and fees to attend Omnicare meetings. Omnicare then used its consultant pharmacists to encourage physicians to prescribe Risperdal for their nursing home patients, but failed to disclose to physicians that the recommendations were a condition of Omnicare receiving the rebate payments from J&J.

Okay, so the feds are going after J&J just like they went after Ivax for its preferred generic agreements with Omnicare. But there's more:

After the conduct at issue, the Food and Drug Administration mandated that the label for Risperdal carry a “black box” warning that “Elderly Patients with dementia-related psychosis treated with atypical antipsychotic drugs [including Risperdal] are at an increased risk of death compared to placebo.”

That's the real kicker: the press release in effect accuses J&J of providing kickbacks to increase use of its product in a very vulnerable patient population (nursing home patients with dementia) where regulators subsequently concluded the product may have done more harm than good.

Now, apart from the assertions in the press release, the government hasn't made any formal complaint against J&J; the US Attorney says only that the investigation is ongoing. J&J notes its disclosures about the investigation in its SEC filings.

And that, too, makes for interesting reading. Here is what J&J says specifically about the Omnicare investigation:

"In September 2005, the Company received a subpoena from the U.S. Attorney’s Office, District of Massachusetts, seeking documents related to sales and marketing of eight drugs to Omnicare, Inc., a manager of pharmaceutical benefits for long-term care facilities. The Johnson & Johnson subsidiaries involved responded to the subpoena. Several employees of the Company’s pharmaceutical subsidiaries have been subpoenaed to testify before a grand jury in connection with this investigation. In April 2009, the Company was served with the complaints in two civil qui tam cases relating to marketing of prescription drugs to Omnicare, Inc. The complaints assert claims under the federal False Claims Act and related state statutes in connection with the marketing of several drugs to Omnicare. The government has not yet announced whether it will intervene in these cases."

But that is not the only investigation involving Risperdal disclosed by J&J. The company's 10-Q filing cites at least 8 other subpoenas received by the company involving promotions of the product:

(1) a January 2004 subpoena seeking information about "sales and marketing of, and clinical trials for" from the Office of Personnel Management (which runs the Federal Employee Health Benefit Program);

(2) a November 2005 subpoena seeking information about "marketing of and adverse reactions to" Risperdal from the Philadelphia US Attorney (which brought the Zyprexa case);

(3) grand jury "subpoenas" related to that investigation;

(4-6) three separate subpoenas from the feds in Boston, Philadelphia and San Francisco "concerning, respectively, sales and marketing of Risperdal by Janssen (now OMJPI), Topamax by Ortho-McNeil (now OMJPI) and Natrecor by Scios" seeking "information regarding the Company’s corporate supervision and oversight of these three subsidiaries, including their sales and marketing of these drugs";

(7) grand jury "subpoenas" in Boston related to those investigations; and

(8) a "HIPPA Subpoena" from Boston a "seeking information regarding the Company’s financial relationship with several psychiatrists."

That tally does not include product liability cases (including some filed by state and federal government payors) involving Risperdal, nor does it include numerous pricing cases that presumably involve Risperdal as well.

We have no idea when or if any of those cases will result in prosecutions or settlements. But if they do, we're betting there will be some big numbers on the table...

While You Were Reforming

You may have heard this already: The US House of Representatives passed a health care reform bill over the weekend. It was a big victory for House Dems, if more of a squeaker than reform proponents would have liked, and now all eyes are on the Senate's bill. Industry, of course, prefers the Senate's version.

What else is going on?

• Bnet is upbeat about Trius Therapeutics potential IPO.
  
• Swiss hearing specialist Sonova said on Monday morning it was buying US cochlear implant maker Advanced Bionics for about $500 million cash.
• Evotec is extending a collaboration with Boehringer Ingelheim. The broader deal is worth Eur 15 million in guaranteed research funding plus milestones and royalties.
• Bloomberg has an extensive look at the cost, and the consequences, of off-label-marketing for Pfizer and fellow pharma law-breakers. Says one judge: “It almost seems as if the pharmaceutical companies said ‘Yeah, yeah, yeah’ to the FDA and then went and did it anyway."

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

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

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

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

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

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!

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

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.