Monday, January 31, 2011

Let It Snow, Let It Snow, I-P-O

Watch out. Here it comes. Unless half the United States turns into an Otter Pop in the next 48 hours, a dozen companies could join the public markets this week, and seven of them are health-care related, says Renaissance Capital. Three of them are biopharma firms: Pacira Pharmaceuticals, AcelRx Pharmaceuticals, and Endocyte.

With the crazy discounts companies were forced to endure to cross the magic IPO bridge in 2010, we're curious to see what the new calendar year brings. (Other than tons of snow and ice.) As this blogger noted in the current issue of The Pink Sheet, the aforementioned AcelRx and Pacira, plus one more company a bit farther behind, Supernus Pharmaceuticals, are all reformulation/delivery plays. Pacira and Supernus are spinouts with technology already incorporated into commercial products at the time of the spinout. All are five years old or less, a relatively fast turnaround for a venture exit. That is, if their venture backers can exit when their post-IPO lockup ends.

Of the 14 biopharmas to debut since the IPO window re-opened in late 2009, only five have stock prices above their original IPO price (as of Jan. 26). The biggest gainer is Aveo Pharmaceuticals, up 64% from its March 11 debut at $9.

But looks can be deceiving. Some IPOs debuted only after drastic haircuts. Take the case of Zogenix, which is up 25% from its IPO. But it wanted to sell 6 million shares in the $12 to $14 per share range; it ended up on November 22 selling 14 million shares at $4 each.

The discounts have had palpable effects.
Trius Therapeutics delayed its debut a few months as it reworked its Phase III plans with the FDA. In August the antibiotic developer sold 10 million shares at $5 each, a big step down from the 6 million shares at $12 to $14 each it hoped to sell. The extra $25 million or so was supposed to pay for a second Phase III trial comparing its lead compound torezolid to Pfizer's standard-of-care for skin infections, Zyvox (linezolid), according to president and CEO Jeffrey Stein. But Trius had to settle for $50 million and one trial, and it will now look to sell some ex-US rights or do a secondary offering to raise cash for a second trial. All of which means the two trials will be roughly in series, not parallel, and the data FDA requires to get an antibiotic approved -- requirements the agency has been overhauling for more than two years -- will be that much farther out.

Enter the delivery hopefuls. AcelRx is testing an oral form of the powerful painkiller sufentanil that a post-surgical patient self-administers in tab form under the tongue, meant as an alternative to press-a-button IV drips. Pacira is also in pain, with a non-opioid analgesic formulated in its Depofoam technology. Supernus is applying extended-release technology it spun out from Shire in 2005 to schizophrenia drugs.

Reformulation is unlikely to rescue beleaguered biotech investors, but if this week's crop of companies have successful debuts it will surely embolden VCs who've shifted their portfolios in recent years away from the long, tough slog of drug discovery and development.
Joining AcelRx, Pacira and Endocyte in the chute are two health services companies, a dental implant maker, and a joint replacement maker.

Speaking of long lead times, look no further than the one company we've not really discussed here: Endocyte has a platform for small molecule drug conjugates, and it's got a folate receptor agonist in Phase II against ovarian and lung cancer. It was founded in 1995 and raised its first venture round in 1996.

Image courtesy of the Weather Channel.

Friday, January 28, 2011

Deals Of The Week: The Sputnik Edition

Outside the deal making arena, the word garnering significant air time this week was “innovation.” During this week’s bipartisan date night, also known as the State of The Union address, President Obama mentioned the word at least nine separate times, as he channeled Survivor’s Jeff Probst. “We need to out-innovate, out-educate, and out-build the rest of the world.” He called on the country to “get behind innovation”, exhorting “this is our generation’s Sputnik moment.”

One could well ask if this is Big Pharma’s Sputnik moment as well. The biopharma industry is well aware of the need for innovation. Indeed, the stricter pricing environment in Europe and the US (where payers are pushing back on multiple classes of drugs even if NICE-like decision making isn't yet a reality), has already forced a wholesale shift, with a greater emphasis on devising drugs for unmet medical need and actually demonstrating said value.

As the industry wrestles with its innovation gap, there are a number of puzzles to solve. The first, and potentially easiest, to come to grips with is access to new products and new ways of thinking. It’s one of the primary reasons biopharma companies are cutting deals with academia and not-for-profits with such regularity, none more so than Pfizer, which rolled out its New York-based Center for Therapeutic Innovation(CTI) just hours before the Prez made his way to Capitol Hill.

A thornier question is what actually constitutes innovation these days. Ask a completely random group of industry execs and the answer almost certainly would be new drugs (or devices) to address some unmet medical need: lupus, major depressive disorder, Alzheimer’s. Undoubtedly those are areas deserving investment; so too, however, are improvements in care delivery in high cost arenas like diabetes or hypertension, where the problem isn’t lack of therapy, but actual compliance. There’s a growing opportunity on the service side, and some companies – Sanofi in diabetes, Novartis via its collaboration with Proteus Biomedical – are taking important, albeit early steps, in this direction.

For pharmas to “win the future”, maybe they, too, need to reinvent themselves, like the Michigan-based mom and pop roofing company run by the Allen brothers, which Obama highlighted in his SOTU challenge. One way to do so is by embracing new definitions of innovation beyond the canonical: a new drug hitting a novel target that historically garners a premium price tag. We remain an industry where “better” might mean “faster” (or more convenient) but it almost never means “cheaper”. Why not?

It's a question worth pondering for big drug makers; as Obama rightly reminds us, "Our destiny is our choice." Meanwhile it's time to take a spin through another weekly deal-making wrap up...

Novartis/Genoptix: This week Novartis launched a $470 million cash tender offer for cancer specialty testing lab Genoptix, which offers personalized diagnostics services related to hematological malignancies – and to a lesser extent solid tumors – to community-based oncologists. The acquisition will add more muscle to the Swiss pharma’s two-and-a-half-year-old Molecular Diagnostics unit. As the pharma’s division head of pharmaceuticals, David Epstein, told investors on the company’s quarterly earnings call on Jan. 27, the move ensures companion diagnostics would be “readily available as we launch our new pharmaceuticals.” Indeed, the acquisition gives Novartis infrastructure and also know-how not normally found in pharma-based R&D that should smooth the transition from biomarker identification to actual companion diagnostic test development, which could range from home brew tests run at Genoptix’s lab to more broadly distributed test kits. As such, the deal is another indication of the confidence the pharma has in its pipeline of targeted cancer drugs, largely for hematological malignancies, and their belief in biomarkers – a marching order unaltered since the formation of the Novartis Institutes for Biomedical Research, whose resources directly fuel much of the effort of the Molecular Diagnostics unit. (To learn more check out this issue of IN VIVO.) Even as the industry has turned more and more towards outsourcing R&D, Novartis continues to drive translational research from within via NIBR. By taking on the risk of bringing in and supporting a diagnostics development infrastructure, it’s making a similar statement in the testing realm. – Mark Ratner

Amgen/BioVex: Amgen's Jan. 24 earnings call promised a plan to invest more heavily in research & development. On the same day, the company put its money where its mouth is.
Amgen deepened its commitment to oncology, revealing plans to acquire biologic vaccine developer BioVex for a $425 million cash upfront payment as well as milestone payments totaling as much as $575 million. Cash-rich (the big biotech has around $18 billion in its coffers), Amgen's massive upfront commitment - the largest for any privately held biotech in at least two years, according to Elsevier's Strategic Transactions database - is a powerful vote of confidence in cancer vaccines, the area in which BioVex has concentrated most of its efforts. The agreement is also easily the largest deal in the sector since April 2010, when Dendreon received approval for Provenge. The deal represents a payday for the well-funded BioVex, which has raised $175 million from at least 15 firms since its spinout from University College London in 1999. For BioVex, the sale to Amgen – especially at this price tag – makes obvious strategic sense. With two Phase III trials underway on its OncoVex product, an immunotherapy for both metastatic melanoma and head and neck cancers, the company faced increasing commercial costs that would require an alternate source of funding. "Getting to the public markets is hard in the current circumstances," Coffin told sister publication "The Pink Sheet" DAILY. "Amgen has amazing resources, and we felt that on balance, this was the best overall opportunity." – Paul Bonanos

Ligand/Cydex: For biotechs, the truism “it’s good to have a revenue stream” has never been more important than in today’s capitally constrained environment. The logic of regular income underpins Ligand Pharmaceutical’s purchase this week of privately-held Cydex Pharmaceuticals for $36 million, nearly all of which – $31.2 million – was paid upfront. The move diversifies Ligand, a classic drug development play founded in 1987 that has been moving away from that paradigm to a model described on the company’s website as “developing or acquiring royalty revenue generating assets and coupling them to an efficiently lean corporate cost structure.” Not including new licensing revenue or accelerated growth of the San Diego biotech’s Promacta, the deal is expected to double Ligand’s projected 2011 revenue relative to what it stood to pull in as a stand-alone and moves the firm forward in its goal of becoming a profitable entity. In 2010 Cydex chalked up $16.3 million in revenue thanks to its proprietary drug reformulation Captisol technology, which works by surrounding drugs with specially modified cyclodextrin molecules to allow tighter control of a medicine’s delivery. The Kansas-based Cydex, which will continue to operate as an independent subsidiary of Ligand following the close of the acquisition, already has numerous partnerships with industry players, including Onyx Pharmaceuticals and Prism Pharmaceuticals for the creation of Captisol-enabled IV formulations of carfilzomib and amidarone respectively. And in terms of regulatory risk, the formulation technology is something FDA seems comfortable with – it’s already included in five marketed medications. If Ligand believes it can earn a pretty penny from the Captisol franchise, Cydex’s investors, which include among others SR One, Eastman Ventures, and Techno Venture Management, have barely achieved an exit. Since its inception in 1993, Cydex has raised around $27 million in financing; like so many other private companies, it tried – and failed – to go public in 2008. – EFL

Teva/Corporacion Infarmasa: Teva Pharmaceuticals has conspicuously shied away from the sometimes frenzied investment in China, India and other emerging markets, noting the high valuations and intense competition. It is targeting Latin America for growth, however, as it progresses with plans to increase revenues from $14 billion in 2009 to $31 billion in 2015. Thanks in part to its 2006 acquisition of rival Ivax, it now has operations in Venezuela, Mexico, Argentina, Chile, Brazil and Peru. With this week’s acquisition of Corporacion Infarmasa, one of Peru’s top ten pharma companies, it makes additional in-roads into this Latin American market. Terms weren't disclosed, but Corporacion Infarmasa is owned by two American investment groups: The Rohatyn Group and Altra Investments. Infarmasa manufactures and sells a portfolio of more than 600 branded and non-branded generics, focused largely on antibiotics, antihistamines, analgesics and corticosteroids. By combining Infarmasa with its existing Peruvian organization, Corporacion Medco, Teva will be the number two player in a market that had a CAGR of 12% between 2005 and 2010 and could reach $1.8 billion by 2015. Expenditure per capita on pharmaceuticals in Peru is one of the lowest in Latin America, leaving ample opportunity for future increases, Teva said. – Wendy Diller

Image courtesy of flickrer dad1_ used with permission through a creative commons license.

Tuesday, January 25, 2011

Servier Chief Steps Down from G5 Presidency

Well, he couldn't exactly remain the figurehead at the top of France's cosy little posse of pharmaceutical firms, the G5, could he? Indeed, Jacques Servier, head of the family-owned firm that has been in the spotlight for months over its now-withdrawn diabetes drug Mediator, was among the founders of this nationalist group, which has colluded since 2004 to the drug sector in France and ensure its competitiveness on the global stage.

Jacques Servier has resigned his position as G5 president, the group declared in a release today, "in order to devote his time to defending the interests of his firm during the current period" (rough translation). There's a bit to defend, certainly: Servier faces over 100 lawsuits from alleged victims of its tarnished drug (generic name: benfluorex), and the full wrath of the country's media, whose efforts have helped escalate the affair right up to the President de la Republique, Nicolas Sarkozy.

On Jan. 19, Servier was booted out of industry association LEEM, too; likewise so the agency can pursue 'serenely' its discussions with public bodies and to allow Servier to 'freely' organize its defense.

Of course, Servier's resignation as G5 president doesn't come close, in price-to-pay terms, to that of poor old Jean Marimbert, head of the country's regulator, AFSSAPS. He has become the most prominent (indeed, so far, the only) scapegoat in this somewhat sordid affair. Not the right scapegoat, either, say some.

But while Servier devotes his time to defending Servier (not an apology in earshot), the G5 -- of which Servier remains a member -- is staunchly supportive of the Mediator-triggered proposals (some emanating from Marimbert himself) for increased transparency within France's drug regulatory process. "In particular, we fully approve of the idea of publishing the list of links between experts and drug firms, as well as any payments made" between the two, says the statement.

The irony of this statement, not really diluted by the fact of Servier's resignation, becomes apparent when reading through French media reports of goings-on within the French firm, not least the accusation that it doctored some of the clinical assessments of Mediator's risk-profile. And accusations of all-too-cosy relationships between doctors, drug firms and politicians. Yup, you remember rightly, Sarkozy decorated Jacques Servier with the highly esteemed Legion d'Honneur in...2009, the same year Mediator was withdrawn.

Ok, so France isn't the only place where this seedy stuff happens. It's just that this 'French scandal', as the national media calls it, has drawn a big bright spotlight onto the country's back-room wranglings, regulators and pharmaco-vigilance processes.

The light may yet draw out some more suspicious goings-on from the shadows; equally (if not more important) will be the impact on the country's already tight pharmacovigilance processes.

Meanwhile, Ipsen's new CEO Marc de Garidel takes up the mantel of G5 presidency, with Pierre Fabre's Olivier Bohuon stepping in as spokesman. These appointments, the group declares, will allow the association to pursue its activities...including those focused on 'le rayonnement international de la France'. That's France's influence, prestige...literally, its radiance.

Monday, January 24, 2011

And Now A Word From Exit/Financing DOTY Winner Ablexis

Before bidding adieu to the acronym DOTY for eleven months, it seems only fair to offer our winners a chance to share their enthusiasm for joining that select group of companies worthy of The Roger. We now turn the microphone over to Larry Green, PhD, CEO of Ablexis, which hammered out its fab Pharma5 consortium while simultaneously raising a Series A.

Ablexis is honored to receive the Roger for Exit/Financing Deal of the Year and to be in the company of the other nominees, all of whom had outstanding deals of their own.

We start by thanking the wise and visionary group at the IN VIVO Blog for our nomination and the many people who voted for Ablexis.

The Ablexis-Pharma consortium deal started out as a simple concept, as a way to better assure an attractive near-term return for investors so that Ablexis could attract Series A investors. People said that we were crazy in thinking we could get five major pharmaceutical companies to all agree on anything.

In fact, negotiations almost broke down the first time we ordered lunch for delivery. (Really, who in their right mind wants to eat vegan pizza?) But we were -- and remain -- fortunate to have great pharma partners who worked with us rather than against us. Pharma partners – Pfizer and you four others (you know who you are!) – we thank you.

Of course, none of this could have happened without the vision and support of our investors. First were our seed investors, California Technology Ventures and Jacobs Capitol Group, who supported us while we rounded up the pharmas. Third Rock Ventures and Pfizer Venture Investments had the vision to say “Yeah, this sounds like a good idea.” We remain indebted to them (no pun intended) and look forward to giving them their IRR and more.

We couldn’t have closed the consortium and financing without the efforts, smarts, and long hours of our attorneys. But they received our thanks when we paid off all our legal bills. (Oy!)

We gratefully acknowledge the contributions of Peet’s Coffee and the Coca-Cola Company, which provided the extra oomph for us to plow through all the negotiations. We also thank United Airlines and the Star Alliance for the occasional upgrades out of cattle class when flying. Kudos to our spouses, children, and parents for putting up with and supporting us through our absences (both physical and spiritual), the sleepless nights, and the occasional irrational mood swings.

Lastly, let us not forget the AlivaMab Mice and those transgenic mouse platforms for therapeutic antibody discovery that have gone (and been acquired) before. Transgenic mice are the most successful platform for human therapeutic antibody discovery. Ablexis is making the next generation of mice to ensure that they remain as such. We look forward to being nominated for another DOTY award in the future.

Friday, January 21, 2011

Deals of the Week's Musings On Avastin And Payer Pushback in Oncology

The J.P. Morgan adrenaline has worn off and the exchange of business cards has yet to yield splashy deal news: no headline M&A, no landscape-altering partnerships. But the biggest tie-ups of the week, authored by inVentiv Health (see below), are nonetheless significant and an early sign of what we think could be a big trend in 2011: the evolution of service providers into one-stop shops for drug makers looking to shed costs via outsourcing.

Ahead of next week's State of the Onion, the other big industry news was regulatory and commercial. Roche and Genentech fired an opening salvo(also called a NOOH) in what could be a protracted battle to retain the breast-cancer indication for their monoclonal juggernaut Avastin. In a 98-page document that seeks a hearing on FDA’s proposal to withdraw Avastin’s accelerated approval in metastatic breast cancer, the company makes a sweeping attack on the agency’s regulatory treatment of the medicine but offers concessions in the form of a new study, a Risk Evaluation and Mitigation Strategy and a continued suspension of marketing. Those efforts, says Genentech, justify keeping the indication available for the time being. (You can check out our full treatment of the brouhaha in the Monday, January 26 edition of sister pub "The Pink Sheet". )

There's even a bit of fear-mongering: Genentech warns that revoking Avastin's metastatic breast cancer indication is tantamount to setting a new approval standard, a move that could deter drug development.

Maybe, but even as Genentech faces off against FDA, the vital question, even if the breast cancer indication is maintained, is how payers will react The industry's overwhelming perspective is that cancer is "different," a protected therapeutic class that allows wide latitude for physicians to choose the regimen, dose, and duration of treatment for patients. But we've seen early signs of payer pushback, with insurers finding new ways to control costs through a soft formulary approach, still experimental, that standardizes treatment for a particular disease or tumor type and gives physicians fewer choices.

As Bernstein Research's Geoffrey Porges noted in an analyst report this week, these programs "have had impressive results with up to 40% reductions in the cancer treatment drug spend in the practices and diseases where they have been implemented, without appreciable negative effects on disease outcomes."

In other words, if you thought bundling would be limited to chronic kidney disease, you haven't been paying attention.

A provocative statement? Undoubtedly. Are we full of hot air? Maaaay-bee. Feel free to weigh in on whether oncology is still a protected class and, if not, the potential impact to the industry. Rest assured we are following the topic closely, even as we round up another edition of....

Ironwood/Protagonist: Ironwood Pharmaceuticals said this week it would license disulfide-rich peptide discovery technology from Protagonist Therapeutics to investigate new drug compounds. Financial terms weren’t disclosed, but Ironwood will make an upfront payment and fund Protagonist’s discovery activities during the lifespan of the partnership. Ironwood will also owe unspecified milestone payments and royalties on products created using Protagonist’s technologies. An Australian university spin-out now based in Redwood City, Calif., Protagonist’s injectable and oral DRPs have the added bonus of reaching targets heretofore poorly addressed by both small molecules and monoclonal antibodies, including interleukin-6 antagonists and novel gastrointestinal targets. The allure of such compounds is strong; these molecules by definition check the unmet medical need box, making them attractive to Big Pharma partners and, by extension, VCs. (For more on the industry's desire to harvest high hanging fruit, see this START-UP story.) Protagonist is backed by Lilly Ventures and a syndicate of Australian firms including Starfish Ventures, QBF, TeQstart and Start-up Australia. Ironwood, a DOTY nominee, is developing drugs for chronic diseases, even as its dual class share structure permits long-term independence. -- Paul Bonanos

Merck Serono/Domain Therapeutics: Merck Serono, a unit of Merck KGaA, has inked a deal with France’s Domain Therapeutics to develop treatments for Parkinson’s disease and other neurodegenerative diseases. It's worth €2 million upfront plus research funding. The early stage collaboration gives Merck Serono access to Domain compounds developed with the biotech's proprietary chemistry. In return, Domain is also eligible for €132 million ($175 million) in milestones for the first two products developed under the collaboration, as well as undisclosed royalties. Domain will use its platform technology to develop metabotropic glutamate receptor 4 (mGluR4) Positive Allosteric Modulator (PAM) drugs. In a press release, Domain execs called the deal validating and believe it "will enable us to sign further deals of this kind.” The collaboration with Domain follows the failure of Merck’s Phase III Parkinson’s drug safinamide to meet endpoints for the treatment of involuntary movements associated with the disease (and negative news in Europe on MS oral drug cladribine). -- Lisa LaMotta

Pfizer/Theraclone: Pfizer signed its third deal in as many months in the antibody discovery space, this week partnering with Theraclone Sciences. (Other tie-ups include the Ablexis consortium and access to Seattle Genetics' ADC technology.) Under the Theraclone deal, Pfizer gains access to the biotech's I-STAR antibody discovery technology, which allows for broad and rapid testing of antibodies made from human B cells, versus antibodies that have been artificially generated in vitro. Pfizer will use the I-STAR technology to discover monoclonal antibodies against up to four undisclosed targets, two in infectious disease and two in cancer. Theraclone stands to receive up to $632 million under the alliance, though how much money will come near-term is unclear. The companies did not break out when the bulk of the payments will be made. Pfizer is responsible for preclinical and clinical development of the candidates. For Theraclone, a privately-held start-up formed in 2005 that has raised $35.5 million since inception, the deal is important as it marks the biotech's first alliance with a big pharma partner.
Pfizer's Senior VP of worldwide biotherapeutics R&D Jose-Carlos Gutiérrez-Ramos told IN VIVO Blog that the drug giant isn't done doing deals in the antibody discovery space. -- Jessica Merrill

inVentiv Health/Campbell Alliance & inVentiv/i3: Big changes are underway at inVentiv Health, an outsourcing outfit specializing in launch and commercialization services. This weeks comes news that it is acquiring two businesses: the clinical outsource firm i3 (from Ingenix) for $400 million and the privately-held consulting firm Campbell Alliance for an undisclosed sum. The moves show how service providers hope to reshape themselves into end-to-end solutions providers to better meet the needs of clients that are slashing R&D costs but no longer want to outsource in a piecemeal fashion. Indeed, bigger fish like Covance and Quintiles are already moving in this direction. Quintiles, for instance, recently announced Vince Aurentz, formerly EVP of Portfolio Development at Merck Serono, as the EVP of its customer solutions business. When IN VIVO Blog caught up with Aurentz at the J.P. Morgan confab, he emphasized his new role is to align the CRO with customers' needs, whether they are consulting, commercial, clinical, or of a capital nature. With purchases of specialists like Campbell and i3, inVentiv is borrowing a page from the Quintiles playbook, though how it integrates the disparate services remains to be seen. Campbell Alliance, for instance, will continue to operate as an independent division. The buyout of Campbell provides an exit for private equity firm Baird Capital, which invested $23.5 million three years ago to fuel the North Carolina consultancy's ambitions to boost annual revenues to $150 million by 2011. -- EFL

Johnson & Johnson/Sanford Burham Institute: Behold the power of academia and not-for-profits. As Pharmas try to identify new wellsprings of innovation, public-private alliances -- a trend we tracked closely in 2010 -- show no signs of tapering off. Hard on the heels of UCSF's myriad deals comes news that Sanford Burnham Institute is teaming up with J&J's Ortho-McNeil-Janssen division to tackle the big hairy problems (aka BHPs) of Alzheimer's disease and major psychiatric disorders. This is Sanford's second major tie-up in recent weeks; it aligned with Takeda in late December to identify new obesity therapies. As part of the latest deal, Ortho-McNeil pays undisclosed upfront and yearly access fees rumored to be bigger on a per-annum basis than what Pfizer plunked down in its UCSF collaboration. There are also the requisite milestone and royalty payments for successfully developed products. In return, the J&J group gets exclusive access to Sanford Burnham's scientists in the areas of neurologic and psychiatric disorders for three years. This isn't the first time J&J, which is trying to reshape its pharma R&D pipeline via open innovation, has turned either to Sanford Burnham, or more broadly, non-profits, for help. Back in 2009 the company's San Diego R&D group teamed up with the non-profit, which is conveniently located on the same cul-de-sac, in an assay development and license agreement aimed at identifying new targets for inflammatory diseases. J&J also has a collaboration with Vanderbilt U.'s Drug Discovery group to develop new schizophrenia targets in the mGluR5 neurotransmitter pathway. A shared mindset is critical to making partnerships like the Burnham/J&J alliance work; the fact that the institute's VP of Drug Discovery Michael Jackson hails from J&J should help. Paul Laikind, the institute's chief business officer, also has industry expertise as former CEO of Metabasis. He predicts the institute has the capacity to do three or four thematic collaborations. Seeing how the non-profit has a site devoted to pediatric research, and regulators increasingly want to see additional studies in children, an industry partnership in this arena seems like a near-term possibility. -- EFL

Image courtesy of flickrer circulating, used with permission through a creative commons license.

And Now A Word From DOTY Alliance Winner Agios Pharmaceuticals

Before bidding adieu to the acronym DOTY for eleven months, it seems only fair to offer our winners a chance to share their enthusiasm for joining that select group of companies worthy of The Roger. We now turn the microphone over to David Schenkein, MD, CEO of Agios Pharmaceuticals, which along with partner Celgene captured the Alliance Deal of the Year for its big sib/little sib tie-up in cancer metabolism.

On behalf of Agios and with appreciation for our alliance partner Celgene, it is my most profound privilege and honor to accept the award for Alliance Deal of the Year from that venerable and peerless institution of biotechnology authority and sagacity, the IN VIVO Blog.

This was a hard fought battle. Our invaluable ally Celgene was staunch and steadfast. Our opponents were worthy, resilient and noble.

We fought on the beaches; we fought on the landing grounds; we fought on Facebook and
in the Apple stores; we fought with the support of our many CRO's across the world. We never surrendered.

Never in the field of business conflict was so much owed by so many to so few (voters).

Let us therefore brace ourselves to our duties, and so bear ourselves that, if Agios lasts for a thousand years, people will still say, "This was their finest hour."

We look forward to receiving our Roger. We know just where to put it.

Financings of the Fortnight Will Sell No Wine Before Its Time

Among many other things, last week's J.P. Morgan conference was a movable feast, what with all the sandwiches and fruit we ate while running from one meeting to the next, not to mention the fancy canapes (or as we say in California, "tapas") and glasses of merlot we quaffed while circulating after hours.

We're still digesting, and what at first blush seemed like a Beaujolais nouveau glow of optimism is now more subtle, more complex: we're getting a not-unmanly bouquet of strawberry and pine tar layered with the churlish piquancy of an overripe kumquat.

In all seriousness, what we're really feeling as we sift through our notes, replay our interviews, and follow up with old and new sources, is that there are more worrisome threads to tug on as we dive into 2011. For example, no one's quite sure where funding for innovation is going to come from in the next few years.

VCs? Sure, from the handful of early-stage stalwarts and quasi-rock stars. By and large, though, VCs are leaving a void, and so are their backers. Fundraising in 2010 across all venture sectors fell for the fourth straight year, to $12.3 billion, according to the National Venture Capital Association.

Meanwhile, liquidity is returning, what with the IPO market cracking open. As we noted in our post-JPM musings, several hopeful execs and investors mentioned the IPO as an exit option in 2011. But that's money out. What about money in? Big Pharma's continued willingness to plow big bucks directly into academia, as evidenced by three recent University of California, San Francisco deals and one with the Sanford-Burnham Medical Research Institute, speaks volumes. As the Burnham Institute's new chief business officer Paul Laikind told us last week, the guiding principle of the past decade for such collaborations has been to avoid the mistakes of the past. There's no proven model for pharma to turn academic investment into pipeline productivity, but they're still plugging away.

So is that the answer? Big Pharma's once-vaunted labs are disappearing, but its cash flows will let a thousand external innovations bloom via academic collaborations, corporate venture, licensing and M&A? Not so fast. There's a little something called the patent cliff, and it's no longer a distant notion. A new Datamonitor report calls for growth among the top branded pharma companies to slow to 1.5% by 2015. Of the 43 firms in the study, only six will exceed the 7.1% growth the industry averaged from 2003 to 2009. Only four Big Pharma -- Bayer, Novartis, Roche, and GlaxoSmithKline -- will generate growth above the 1.5% average in the next four years.

We're not throwing our weight completely behind one data set, nor do we believe that Pharma's cash reserves will dry up. After all, every layoff in the lab frees up dollars to spend outside Pharma's walls. But those dollars will be heavily scrutinized. Shareholders will want some of them back in their own pockets. And there are plenty inside Big Pharma's walls still fighting to keep those dollars in-house. We're not convinced Pharma can adequately address the widening Valley of Death, and we can't find anyone who thinks traditional VC will cycle back to its old "adventure capital" roots. And that makes us scratch our heads and continue to wonder who's going to pay to make the medicines that come to market 15 years from now.

We're just glad doctors now say it's good to have a glass of wine or two a day. We recommend pairing an earthy, sun-baked Rioja with a spicy plate of...

Dendreon: The Seattle immunotherapy pioneer said Jan. 14 it sold $540 million in convertible debt, due in 2016 and with an annual interest of 2.875%. The cash comes as Dendreon is rolling out its autologous treatment for prostate cancer, Provenge (sipuleucel-T), which was approved in the US last April. It isn't expected to gain heavy adoption until the fourth quarter of 2011, when the company has said it expects to gain half its revenue of $350 million to $400 million for the year. (Total 2010 sales were $47 million.) Meanwhile, Dendreon needs cash. Provenge requires complex logistics and multiple production facilities, as well as persistent education of medical staff. To create the product, a patient's immune cells are extracted at a blood bank or Red Cross center, shipped to a production center where the cells are exposed to a protein that acts as a prostate-cancer antigen, then shipped back and infused into the patient at a clinic. Dendreon is building out three manufacturing facilities in the US in New Jersey, Atlanta, and Southern California, and building another in Germany. The new cash will also go to fund ongoing commercial and regulatory efforts, particularly its European sales strategy, where Dendreon aims to sell Provenge on its own at the same price -- $93,000 a dose -- as in the US. The debt conversion rate starts at about 19.5 shares of stock per $1,000 of debt, or about $51.24 per share of stock -- a 40% premium over $36.60, which was the closing share price on January 13. Dendreon noted that the conversion rate could change "upon the occurrence of certain events." -- Alex Lash

Amarin: The Irish company completed an offering of $104.9 million in American depository shares this week, selling 13.8 million ADS at $7.60 a piece, a 2% discount to the price announced on Jan. 13. Amarin plans to use the funds to pay for commercialization of AMR-101, an omega-3 fatty acid meant to treat high triglyceride levels. Amarin has been chasing GlaxoSmithKline’s Lovaza, a medicinal-grade fish oil already on the market. Positive top-line results from a Phase III study conducted under a special protocol assessment from FDA showed in November that AMR-101 raised HDL-cholesterol, while lowering LDL, or bad cholesterol. The positive results will allow Amarin to file for approval of AMR-101 in 2011, a year ahead of schedule. Lovaza has annual sales of $1 billion but has a restricted indication due to its propensity to raise LDL-cholesterol. The momentum around AMR-101 has ratcheted up speculation that Amarin is a likely take-out target, fueled in part by the company itself. At the J.P. Morgan conference, new CEO Joe Zakrzewski told IN VIVO Blog Amarin is "definitely" looking for a commercialization partner but is weighing whether to partner before the final data from the Phase III ANCHOR trial reads out. Plenty of big firms with global reach could use a cardiovascular offering for their depleted late-stage pipelines. (Merck comes to mind, for starters.) Jeffries & Co. and Leerink Swann acted as joint book-running managers for the offering. -- Lisa LaMotta and Ellen Licking

Rib-X Pharmaceuticals: Antibiotic developer Rib-X said Jan. 11 it has raised a $20 million round led by longtime investor Warburg Pincus, mainly to fund a 240-patient Phase 2b trial of its lead product delafloxacin against standards of care linezolid and vancomycin. The firm hoped to be in Phase III by now, but an overhaul of FDA guidelines for clinical endpoints in complicated skin and soft tissue infections from drug-resistant bacteria, which delafloxacin is aimed to combat, pushed Rib-X into a Phase IIb. The biotech will now measure its medicine's ability versus comparators to stop the spread of lesions as well as fever abatement, the new primary endpoints in FDA's rewritten guidelines. Success in the trial would "substantially de-risk" simultaneous Phase III trials, as CEO Mark Leuchtenberger told IN VIVO Blog last week. Last year antibiotic rival Trius Therapeutics delayed for several months the start of a Phase III trial in skin and soft tissue infection to discuss design with FDA. It eventually proceeded without adding an intermediate trial to its program. Trius also put a planned IPO on hold for a few months but went public last August. Rib-X will have to raise more money or find a partner for a Phase III, said Leuchtenberger. The company also hopes to announce a partnership by the end of the first quarter for its preclinical RX-04 program against Gram-negative bacteria. -- A.L.

Civitas Therapeutics: Talk about breathing new life. Civitas is the spin-out of Alkermes' pulmonary business, which was left gasping for air in March 2008 when larger partner Eli Lilly dropped its inhaled insulin program, the third major program of its kind to get the kibosh in a five-month span. (The fourth and final, Afrezza from Mannkind, was just ordered back to the drawing board by an FDA complete response letter.) With its target Parkinson's disease, not diabetes, Civitas is resuscitating the AIR system -- an inhaler about the size of a fountain pen and a dry powder technology -- and taking over Alkermes' manufacturing plant in the Boston suburb of Chelsea. Civitas is armed with a $20 million Series A from Longitude Capital and Canaan Partners and ready to push aggressively forward with an inhaled version of an undisclosed Parkinson's treatment that CEO Glenn Batchelder told IN VIVO Blog he hopes to bring to clinical proof of concept by the end of 2012. The former CEO of BIND Biosciences, Batchelder said AIR can deliver a consistent, immediate dose to patients in the midst of an acute "off period" -- characterized by halting or frozen movement -- even when it might be difficult to draw a sustained breath. Bachelder said the company hasn't decided whether to target maintenance therapy, "rescue" therapy for acute attacks, or both. Alkermes remains a shareholder in Civitas with an undisclosed stake. -- A.L.

Image courtesy of flickr user nyoin via a Creative Commons license.

Wednesday, January 19, 2011

Afssaps Boots Marimbert, a Victim of His Own Success

Jean Marimbert’s resignation from his post as the Director General of the French medicines agency, Afssaps, carries the whiff of scapegoating and smacks of a blunt sense of irony. His departure, however, prompted by revelations concerning Servier’s diabetes drug, Mediator, which is rumored to have caused upwards of 2,000 deaths, may cause France’s regulatory establishment more problems than it might solve.

Marimbert wasn't a born regulator, but since being appointed as head of Afssaps for a three-year term in 2004, he has become known in European regulatory circles as a solid and determined leader. He was re-appointed in 2007 and once again in 2010. This alone is testament to his ability and the respect accorded him by the health ministry.

His tenure hasn't been without challenges. Since 2004 the number of marketing authorization applications seen by Afssaps has risen by over 30%. At the same time, the agency has had to contend with a plethora of new laws from Brussels, including the Orphan Drug, Paediatric Medicines and Advanced Therapy Medicinal Products Regulations. Over the same period, the number of staff at the agency has risen by barely 6%.

The Vioxx withdrawal prompted Marimbert to focus on specific measures to promote drug safety. Spurred on by politicians who claimed that Afssaps was not doing enough in this area, Marimbert had all of the minutes of the agency’s regular committee meetings published online, starting with those for pharmacovigilance. This was a first for Europe.

Moreover, he tightened the pharmacovigilance system itself, and placed more emphasis on risk management plans within this framework. The irony is that it is transparency and pharmacovigilance, linked with Mediator, that have prompted his downfall.

The Mediator scandal has grown in size since breaking last November, and links between Servier, government ministers and even President Sarkozy have been called into question. Health Minister Xavier Bertrand has in the first instance pointed the finger of blame at Servier, but he also referred to severe failures in the functioning of the regulatory system, a veiled reference to Afssaps and Marimbert. The government’s main aim, it would appear, is to put an end to the Mediator scandal well in advance of the presidential elections in 2012. Marimbert’s departure serves well to deflect attention.

Bertrand is now looking at whether pharmacovigilance should be carved out of the medicines agency and set up a separate entity to carry out this task. This is unequivocally the height of folly. What’s more, it comes at a time when European competent authorities have identified and begun to consolidate the link between risk-benefit assessment and the regular monitoring of marketed drugs.

For example, the Heads of Medicines Agencies, the network of the Heads of the EU National Competent Authorities says that an effective medicines regulatory system must be able to estimate the risk-benefit of medicines, communicate that information effectively and take regulatory action when necessary to protect health. All of this must be ongoing in unison during the life cycle of the product.

This approach benefits not only patients, but also manufacturers. Thus, if an adverse incident is flagged up through effective pharmacovigilance, instead of simply withdrawing the product, a re-assessment of the risk-benefit of the product in light of the new information can be made. Marimbert made this point clear in his resignation letter, published in the French daily Liberation, last week.

What direction he will take is as yet uncertain. However, there is a job going at the European Medicines Agency, following the departure of its Executive Director, Thomas Lönngren on Dec. 31, 2010. However, whilst Marimbert hovers in limbo, Lönngren has been snapped up by independent regulatory and market access consultancy NDA and has been asked to play a strategic advisory role.

The problem for Marimbert is that he may have to wait a while before the taint of scandal fades. On the other hand, he should be safe in the knowledge that the government owes him one. -- Faraz Kermani

Private Boehringer Can Wear Two Hats

Yesterday's news that Boehringer is buying Amgen's Fremont, CA manufacturing facility is a reminder that Boehringer isn't just an R&D-based drugs giant, it's a contract manufacturer, too. It has been making Amgen's (and others') biologics for years. Expansion of its manufacturing to the West coast of the US has been underway for a couple of years, with CMO Avid Biosciences added in September 2009.

No, Boehringer doesn't have marketed biologics of its own, not yet. But they're in the works, and if/when they do appear, Boehringer will be well-placed (we, and others like Genmab, know how wobbly the manufacturing supply/demand balance can get...).

So sure, maybe Boehringer missed a trick by not making and selling its own biologics, sooner. But it doesn't really matter: that's what being private does for you. You can wear one hat, two hats, or seventeen. And they don't even have to be in fashion.

Indeed, never have the virtues of being private been quite so compelling. Economic crisis? Dismal public markets? Quarterly earnings pressures? Who cares if you have rich family backers (or equivalent) with a very long-term perspective and better things to do than churn out stock-market-requirement-meeting documentation every twelve weeks.

Germany's Boehringer is among the largest of Europe's privately-owned drug firms (Grunenthal, Servier, Pierre Fabre, Sigma Tau and Norgine are a few of the others...). Unlike most other Big Pharma (for indeed, it classifies as one; it's about Lilly-sized, or Schering-Plough pre-merger), Boehringer isn't bothering to put on the 'let's-take-R&D-through-iterative-disruptive-re-organization' hat; it's sticking with the continuity and stability headwear, which, it claims, is protecting it from the elements just fine.

Take diabetes: not many of us thought Boehringer, of Spiriva and now Pradaxa fame, was even interested. Turns out, as they revealed in October 2008, they have quite a nice full, varied pipeline, thanks. Nice enough to team up with Eli Lilly's struggling franchise to create an "innovative balanced portfolio" and double its commercial firepower (not to mention pocketing $388 million up-front).

Ok, let's not get carried away. This deal aside and despite new noises that suggest it's gearing up on the business development front, Boehringer hasn't exactly been a dealmaking pioneer; it hasn't had to be. Even the Lilly tie-up patently isn't a sign of more to come, as Boehringer's chief Andreas Barner made very clear on the call announcing the deal.

image by flickrer andyi used under a creative commons licence

Monday, January 17, 2011

Biosimilars: Empty Threats?

The Jan. 10 announcement by Novartis' Sandoz division of the start of Phase II trials of a biosimilar version of Roche's rituximab (Rituxan) is beginning to look a bit like posturing. After all, when was the last time a biosimilars firm gave away anything about its pipeline, let alone details of a specific compound?

Granted, we knew Sandoz has biosimilar antibodies in the works; they'd told us as much. And it's no real surprise that it's rituximab: big seller ($5.6 billion in 2009), not that many years of patent life remaining (not, at least, if you remember that this is only the start of Phase II...). But why make a song and dance about it if you then don't give away any details?

To scare Roche, of course. CFO Erich Hunziker was reported as having dismissively told investors at JP Morgan last week that "people who want to eat into this [biosimilars] market make announcements every day....", and to have hinted at a super-duper defense strategy which it would be "stupid" to reveal. Maybe it wasn't so super after all: he appears, over the weekend, to have fled (ok, so that's more to do with being spurned for the top-job than with Sandoz's activities.)

But seriously, given that Europe has recently issued guidelines on biosimilar antibodies, we tried to find out more about how Sandoz might be interpreting these. (Ok, so we're a bit naive sometimes.) Like, are you assuming you may be able to get away without clinical efficacy trials? What end-points might you use if there are trials?

Sandoz does, in general terms, "understand the guidelines as requiring clinical development if biosimilarity cannot be demonstrated with valid PK and PD studies," the company said in an email, but "we don't comment in greater detail at this stage on our rituximab development program." Same goes for endpoints, which will be "negotiated on a case by case basis with regulatory agencies," and for whether or not the company will do more trials than strictly necessary in order to provide a convincing body of data for doctors (though Sandoz does concede that "a quality data package" will be required "to convince stakeholders of quality, safety and efficacy").

Ok, so on to the advertised 'robust, high-yield in-house production process' at Sandoz. Could this be used for other antibodies in the pipeline (a pipe that numbers 8-10 molecules overall)? No comment, just the thing about internal synergies, including across the Novartis group as a whole.

Don't get us wrong, we know/believe that Sandoz is among the best-placed competitors in the biosimilars market. And we respect that the company has learnt from -- and thus will be more successful as a result of -- its commercial experience to date, with products including biosimilar growth hormone Omnitrope.

But it's hard to avoid the suspicion that PR like this is a bit, well, airy. With three products on the market, Sandoz doesn't need to waste paper reinforcing its "commitment to maintain global biosimilar market leadership".

And anyway, we've just done it for them.

Can Roche's New Hippe Pull Some Rabbits Out?

Hunziker's out, Hippe's in. As Roche's CFO, we mean. The Swiss drugs group confirmed Monday the appointment of Alan Hippe, previously CFO at Germany's largest steel maker, ThyssenKrupp. Hippe will replace Erich Hunziker after ten years running the tills at the pharma once dubbed "a bank with a drugs business on the side" (difficult to say which is worse, these days...).

But that comment was from a previous time, that of Hunziker's predecessor, Henri Meier. Meier was the wizard behind the partial acquisition of Genentech; Hunziker is credited with "obtaining favorable conditions" for the $46.8 billion full acquisition -- or "privatization" as Roche puts it in its release -- of Genentech in 2009; in other words, he carried off the great big corporate bond offering.

Perhaps Hunziker wanted a bit more credit than he got, though: German media speculation suggests he wanted the top job at Roche (that's Severin Schwan's job), so his departure "was expected", comments one London-based analyst, "especially now that the integration of Genentech is complete."

Hippe--another ambitious fellow who also, our media friends say, wanted the top job at Thyssen, and quit three years before his contract was due to end -- joins the growing handful of pharma CFOs with a background in heavy industry, where cost-cutting is a rather older friend than it is to the pharma industry. AstraZeneca's Simon Lowth came from Scottish Power PLC (we know how stingy the Scots are); Sanofi Aventis' Jerome Contamine, appointed in 2009, came from environmental services group Veolia.

Hippe's certainly got some slashing to follow through: Roche in September 2010 confirmed that a radical cost-cutting plan was in the works; in November 2010 details of "operational excellence" were released, including CHF1.8 billion in savings during 2011, CHF2.4 billion from 2012 onwards (that's excluding Genentech synergies) and 4880 fewer staff across the U.S and E.U.

Given that sentiment is at "an all time low" for Roche, according to analysts (not so surprising given the string of setbacks, from taspoglutide, to ocrelizumab, to trastuzumab DM1...not to mention Avastin troubles and biosimilar threats (who needs patent expiries, eh?)), Schwan will no doubt be hoping that Hippe can pull some Meier-style rabbits out of the hat, too.

Sunday, January 16, 2011

Deals Of the Week: Merck-Parexel; Biotie-Synosia And More...

The setback in Merck & Co.'s Phase III program for its anti-platelet drug vorapaxar and the annual J.P. Morgan health care conference dominated this week's biopharma news, but they weren't the only news of note.

To be sure, the news flow from the J.P. Morgan was relentless, and the negative news on vorapaxar took wind out of Merck's seemingly full sail, leaving analysts to re-assess the company's risk profile. But Merck and others are still delivering on deals, many of which underscore significant trends emerging in 2010, including growing interest in risk sharing (the Lilly-Boehringer deal highlights that trend spot on), outsourcing, industry-academia partnerships, and early-stage cross-company collaborations. With this week starting off with a federal holiday in the U.S., here's some noteworthy deals, with strategic themes we can expect to see more of:

Merck/Parexel International: Merck was one of the first companies to announce a strategy for bringing low-cost biologic copies to market after U.S. healthcare reform provided a clearer regulatory path for biosimilars. It announced the formation of a BioVentures unit in December 2008, with plans to put at least six biosimilars in development by 2012. It has kept close to the vest details of its target priorities, however, noting publicly only its interest in Amgen's granulocyte colony-stimulating factors Neupogen (filgrastim) and Neulasta (pegfilgrastim).

Now, the Big Pharma has struck a partnership with clinical research organization Parexel International Corp. in which the CRO will conduct clinical trials for some of Merck's biosimilar programs. True to form, the companies won't say which therapeutic areas are covered by their collaboration, however. "One of the things that was exciting for us is that we were able to build a deal structure with Parexel in which they are rewarded for performance," Merck BioVentures President Michael Kamarck told "The Pink Sheet" DAILY. "In the biosimilars arena, time is everything, so...they will rpovide us with timeliness, and efficiency in execution of trials." -- Lisa LaMotta.

Biotie Therapies/Synosia Therapeutics: An all-European "global leader" in CNS drug development will be born out of the proposed $120 million combination of Finland-based Biotie Therapies and Switzerland-based Synosia Therapeutics. Following Biotie's all-share acquisition of Synosia, announced Jan. 11, the combined entity will have nine CNS products in clinical development, including the Phase III alcohol dependence product nalmefene, which partner Lundbeck is developing, and a Parkinson's disease-movement disorder therapy, which Synosia has been developing in collaboration with UCB Pharma.

Under the agreement, likely to close shortly after a shareholder's meeting on Feb. 1, Biotie will issue 161,448,371 shares to shareholders and warrant holders of privately owned Synosia. Shareholders, including Versant Ventures, Abingworth LLP, Novo AS, and UCB SA, will therefore control 50% of the company. The agreement comes just in time for Biotie, which had liquid assets of only $11.9 million at the end of the 2010 third quarter. The move boosts a therapeutic sector which has seen companies taking divergent views on its prospects -- some, like GlaxoSmithKline PLC, have exited several areas of CNS, while others, like Biogen Idec, are making the field a core focus -- John Davis.

Takeda San Francisco/ Pieris AG: The antibody-focused North American subsidiary of Japan's Takeda Pharmaceutical Co. Ltd., has agreed to license the protein scaffold technology of privately-held Pieris AG to identify drug candidates around a target of Takeda's choosing. Financial terms were undisclosed, although Takeda says it will have an option to advance at least one drug candidate on its own. Pieris maintains a proprietary library of recombinantly-engineered lipcalins, proteins, which bind with and transport a range of hydrophic molecules. Those proteins, which it has named Anticalins, form the basis of the Takeda deal. The company also licensed its ANticalin platform in a multi-target deal with Sanofi-Aventis SA and its vaccines division Sanofi Pasteur in September. Backed by venture investors including OrbiMed Advisors and Global Life Science Ventures, Pieris has its own pipeline as well, including a Phase I anti-VEGF candidate. -- Paul Bonanos.

Bristol-Myers/Pharmasset: Bristol-Myers Squibb Co. and Pharmasset Inc. have teamed up in a clinical partnership that marks the first cross-company collaboration to study two investigational oral drugs for the treatment of hepatitis C. The firms announced plans to study Bristol's NS5A replication complex inhibitor BMS-790052 and Pharmasset's nucleotide polymerase inhibitor on Jan. 10.

Drug makers do not generally collaborate on clinical trials for investigative drugs for competitive reasons and tend instead to study combinations within their own pipelines or with at least one already marketed drug. Regulatory uncertainties and, perhaps, just as important, cultural resistance, also present hurdles. But novel-novel combinations increasingly are viewed as the best way to treat certain serious diseases, like cancer and hepatitis C, and have become more common.

In hepatitis C specifically, the primary drug development focus is on combinations that could replace or reduce the use of the current standard of care, ribavirin and pegylated interferon (Roche's Pegasys or Merck's Pegintron), a regimen with a hasty side effect profile and limited efficacy. Bristol's decision to sign a clinical trial collaboration rather than in-licensing a polymerase inhibitor is intersting since the company recently acquired its hepatitsi C partner ZymoGenetics to gain more control over the program. -- Jess Merrill

Friday, January 14, 2011

The JPMorgan Healthcare Conference: Where Optimism Is Its Own Catalyst

The annual January health care confab in San Francisco is ostensibly run by JPMorgan but long ago took on a life of its own and spread well beyond the hallways of the Westin St. Francis. (Yes, they are crowded; we think we can all get over it.) One tweeter dubbed it "spring break for old white dudes in suits" but (thankfully) we think it has moved beyond that in so many ways too.

However, what the broader JPMorgan conference ecosystem can't escape is the sureness with which it knows its importance. It's not necessarily unearned or mistaken, this sense of self-worth. As a barometer for sentiment in the health care world, and biopharma in particular, the meeting and its attendant parties, satellite conferences, and offsite deal-building are impossible to beat. It doesn't really matter whether that's by design or by accident of geography and calendar.

Every year at JPMorgan, the mood's the thing. And this year, the mood was unmistakably optimistic. Perhaps the best part of that mood, that vibe, that intuition, is that nobody we talked to could really put their finger on Why. There were no concrete reasons offered for the buoyancy carrying people from meeting to meeting and from reception to reception. It just was.

And so, this was the year biotech CEOs talked with straight faces about their potential 2011 IPOs. This was the year a tiny biotech boasted about its technology from the sides of Powell-Mason cable cars (yes, Adimab bought every available ad for the week). This was the year one of the industry's oldest precommercial biotechs talked about launching not one but two drugs in the next 12 months (Vertex's straws did the trick). And this was the year that Big Pharma shifted from talking about dealing with patent expiries to talking about bulging pipelines (and of course returning cash to shareholders).

Like last year's meeting (also tinged, if not quite as much, with a sense of optimism) there is of course a reality that doesn't quite live up to the good mood. In 2010 fewer biotechs received Series A cash than in any recent year, and the average haul in those rounds was also lower than any year in recent memory, as we'll report in the next issue of START-UP. Hours after talking about its industry leading pipeline, Merck got a $7 billion wake-up call, losing that much market cap in response to some fuzzy bad news coming out of its voraxapar Phase III program. Industry's experiments with R&D models have yet to prove themselves -- or excite investors -- and it will be a long time before the results of that restructuring can demonstrate any success. Regulators remain safety-focused, payers remain in the drivers' seat.

We left San Francisco with the sense there are of a lot of deals in the industry pipeline. Hey, even those crazy kids Sanofi-Aventis and Genzyme may make a go of it (you might have heard about that one). Pharma is still in its first steps of a long march toward externalization of R&D, so we don't doubt the deals will come.

But unlike the majority of those future deals, we suspect 2011's optimism is front-end loaded. A mood is just a mood, after all.

Thursday, January 13, 2011

The Health Policy Divide: East Coast vs. West Coast (Part 2: The Climate for Innovation)

The Council for American Medical Innovation hosted an event in Washington DC January 12 focused on the policy climate for innovation, and one theme was unmistakable: if the US doesn’t make a sustained effort, it risks losing its position of leadership in medical innovation to other countries hungry to attract those investments.

US policymakers, said Pharmaceutical Research & Manufacturers of America CEO John Castellani, need to take seriously the notion that industrial policy can and should encourage innovation.

That has been a common enough theme for the biopharma sector for decades, but the focus of international competition has changed. As the tweets from the conference make clear, everyone now sees China as the up-and-coming center for medical innovation, the country willing to do whatever it takes to attract the best and brightest innovators.

At the same time, the JP Morgan health care conference in San Francisco was devoting an entire track to Chinese companies—and, as the Wall Street Journal reports, it was standing room only.

By that metric, China’s efforts to attract investment in innovation sure seem to be working.

The Health Policy Divide: East Coast vs. West Coast (Part 1: The Reform Law)

The annual JP Morgan health care conference drew thousands of health care industry executives and investors to San Francisco this week, offering a nice chance to contrast the views of health care policy inside the Beltway and (far) outside.

We will start with today’s headline from Politico: Investors see health reform's potential. “As Republicans push forward on repealing health reform, planning the law’s demise, a different conversation is happening among thousands of health care investors gathered in San Francisco for this week’s J.P Morgan Health Care Conference: how to capitalize on health reform’s new business opportunities,” writes Sarah Kliff.

Indeed, presentations by insurers, PBMs, retail pharmacy and other service companies all touched on the potential benefits—yes, benefits—of the reform law on their prospects for growth. Now, that doesn’t mean investors are thrilled at the idea that insurers’ profit margins will (in effect) be regulated by the feds or that Medicare Advantage is facing steep cuts. But the outlook is decidedly optimistic.

Of course, that was not supposed to be the Politico headline today. But for the horrible events in Tuscon this weekend, the big health reform news would have been coming out of DC, where the House vote on repealing the law was supposed to happen January 12. That vote has been delayed, but not for good.

Indeed, as former Sen. Judd Gregg told the JP Morgan conference during a January 12 keynote, the vote to repeal the law will likely be the first of several staged votes to keep the anti-reform pressure on. Gregg expects the GOP to follow-up the first vote with a series of more targeted votes to repeal items like the individual mandate, the MA cuts, and so on, with each vote intended to dramatize the message that it will take a GOP sweep in 2012 to get rid of the law for good.

Gregg, incidentally, worries that the staged votes might “poison the well” on opportunities to do more “substantive legislation” in health care, focused squarely on what he sees as the overarching priority for the new Congress: deficit reduction. He believes there can and will be progress on areas like tax reform, social security reform, and cuts in discretionary spending—but argues that deficits can’t be avoided without more meaningful steps to address health care costs.

Still, the repeal votes will come soon enough. But it will be interesting to see whether the message from San Francisco this week starts to change the politics of health care reform in DC.

Monday, January 10, 2011

What DOTW Didn't Say about Veridex/MGH

A widely read initial report from the Associated Press on Monday January 3, 2011 mischaracterized the new arrangement between Veridex and Mass General around the development of a third generation system for capturing and analyzing circulating tumor cells. (Here’s one link to that report, since amended by AP.)

The news service originally presented the deal as being around an existing second-generation “herringbone” pattern CTC chip technology, originally described in a Proceedings of the National Academy of Sciences paper in October 2010. AP even ran a photo of that chip lifted from the paper.

But the technology of interest to J&J is broader based and earlier in development; hence the five-year time horizon for this collaboration. (See our coverage in the January 7 Deals of the Week for more.) The third-gen system uses antibodies tagged with magnetic beads that can be mixed in with the blood sample.

In earlier versions, antibodies were affixed to a post on the surface of the chip (or on a V-shaped herringbone surface, which creates more active contact at the surface) to capture the tumor cells as the blood sample poured over it. Having antibodies in solution instead will make the system more versatile and greatly simplify chip manufacturing.

It also should improve specificity by allowing a purer collection of the CTCs, with reduced background noise from the capture of normal hematopoietic cells. Both the prior post and herringbone systems are 10-100x more sensitive than the current Veridex CellSearch system, says CTC chip inventor Mehmet Toner of MGH. He expects the third-gen system will be even better.

In the meantime, MGH is continuing development of the herringbone chip, through NIH grants and other sponsorship including support from Stand Up 2 Cancer, a research funding group organized by Hollywood celebrities. Toner and Dan Haber of MGH lead one of SU2C’s five scientific “Dream Teams.”

Friday, January 07, 2011

Hark! DOTW Rings in the New Year

Lots of deals, lots of glory! Let's sit back and hear the story!

No, not of The Producers – that satire about Broadway, from which such a line was gleaned – and no, it's not the story behind the theatrical hit's flagship song 'Springtime for Dealmakers,' either. This story has to do a baker's dozen of pharma industry deals, which materialized this week, Number Two of the New Year, but so far reflective of old, non-too entertaining trends: notably a desire to access pre-clinical targets or biomarker tools without taking too much risk, i.e., spending much $$ upfront.

The reality is hard to decipher because the deals revealed little about financial terms, but fair to say that a good portion seemed to involve small up-fronts and were heavily backloaded. Interestingly, two of the pack involved companion diagnostics, a field that is making slow but steady progress, despite uncertainties around the regulatory pathway, especially in the U.S.; valuation basics, which is a particularly sticky point for business development executives, and commercial potential of linking tying therapeutic decision making to particular drugs.

Quite a few of this week’s deals (only some of which are noted below) involve antibody discovery—and the field of antibody conjugates is heating up, as Pfizer became the latest Big Pharma to put its toe in the water ("Making the Case For Antibody Conjugates," IN VIVO, Dec. 2010). And from a geographic perspective, for reasons that may have to do with the amount of cash pharma holds overseas as well as the current mindset of European big pharma companies (oh, and government incentives), European biotechs like Immutep and Santaris continued to generate a disproportionate share of activity.

If there's a seasonal element to deal making, hopefully, this is the nadir of the cycle. But surely the biopharma industry and Broadway share a high-risk high reward model – only one is infinitely more entertaining than the other, depending on how you prefer your fixes (The comparison stops there). Below is a smattering of some of the more interesting activities, at least from this biopharma watcher's perspective.

GlaxoSmithKline/Immutep: This deal is an exception to the masses, perhaps in part because GSK shows no sign of letting up on its interest in autoimmune diseases. The Big Pharma has acquired worldwide exclusive rights to a potential new therapeutic approach to such conditions from Immutep, a small French biotech located on the outskirts of Paris. One of Immutep’s founders discovered lymphocyte activation gene-3 (LAG-3) a number of years ago, and the company has since designed a cytoxic antibody, IMP731, which kills off cells whose LAG-3 gene is active. As this includes T lymphocytes involved in the autoimmune disease process, but not resting “memory” T lymphocytes involved in protecting against infections, it is hoped that IMP731 represents a new, safer, approach to treating autoimmune conditions. Immutep is in line for an upfront payment and milestones worth up to $100 million from the GSK deal, and also single-digit, tiered royalties on any eventual sales. The agreement covers all antibodies discovered at Immutep that deplete cells that are positive for LAG-3. GSK is nearing the market with its first product for an autoimmune condition, the lupus therapy Benlysta (belimumab, developed in collaboration with Human Genome Sciences), which has a US PDUFA action date of 10 March. The multinational has a number of other potential autoimmune products in its R&D pipeline, including the antibody ofatumamab, which is licensed from Danish company Genmab and is already marketed for chronic lymphocytic leukemia, as Arzerra. –John Davis

Genentech/Plexxikon: With Plexxikon and Roche's high-profile first-in-class BRAF inhibitor PLX4032/RG7204 in late-stage clinical trials, the development partners announced an additional agreement that gives Plexxikon the right to co-promote the drug through a specialty sales force in the U.S. PLX4032 has shown impressive tumor shrinkage in patients with metastatic melanoma; currently only limited, ineffective options exist, making metastatic melanoma one of the deadliest cancers. Plexxikon, which discovered PLX4032, has had a partnership with Roche since 2006, which included the U.S. co-promote option it exercised on Jan 6. As part of that deal, Roche's Genentech unit paid Plexxikon $40 million upfront, with the promise of another $660 million in milestones; in exchange, it got global rights to PLX4032. As the drug advanced, it has captured increasing attention in the scientific community, both because the data is strong and because it is one of the first drugs to be developed with a companion diagnostic in the protocol nearly from the start of clinical trials. PLX4032 could launch as early as late this year, according Plexxikon, pending a positive interim analysis of an ongoing Phase III trial and FDA's agreement to review the drug on a priority basis. –Jessica Merrill

Veridex (J&J)/Mass General: Mass General Hospital has signed a five-year, $30 million deal with Johnson & Johnson’s diagnostics unit Veridex to develop a third-generation microfluidics-based chip for capturing and analyzing circulating tumor cells (CTCs). The program will be jointly managed at J&J by Veridex and Ortho Biotech Oncology R&D. A few CTC systems exist but they are pretty basic; CellSearch, for example, which Veridex makes, counts CTCs in a blood sample for use in cancer prognosis but can't do sophisticated molecular analysis on the sample. The new collaboration aims to develop and obtain regulatory approval for a standardized diagnostic platform that will be able to conduct biomarker analysis on DNA, RNA, or protein from tumor cells collected noninvasively -- and presumably, repeatedly -- during the course of cancer therapy. J&J’s rationale for seizing now on this opportunity is two-fold: The technology for analyzing rare cells is at a point where it can provide relevant clinical information from very small numbers of tumor cells isolated from the blood; and a significant number of targeted molecular therapies are emerging that invite such monitoring before and during treatment. The collaborators say it will take 2-3 years for the new chip to be ready for clinical validation, which will include prospective clinical trials, first at MGH, then in multiple centers.—Mark Ratner

Transgene/Beckman Coulter – A growing trend in biopharmaceutical development, particularly in the oncology drug sector, is the effort to pair an experimental therapy with a companion diagnostic test that helps determine which patients might (or might not) be optimal candidates for therapy. France’s Transgene, already a player in this field, announced another deal Jan. 5 in which Beckman Coulter will develop a companion test for TG4010, its immunotherapy slated to begin Phase IIb/III development later this year in non-small cell lung cancer. Terms of the deal were not disclosed. Transgene, which is eligible for a $10 million option fee plus up to $956 million in milestone payments if Novartis elects to license TG4010 under a March 2010 agreement, already is collaborating with Ventana Medical Systems on a test enabling it to identify patients with MUC1 positive tumor cells. Beckman Coulter will develop a test that measures the level of activated Natural Killer (aNK) cells (CD16+, CD56+, CD69+/CD45+ lymphocytes) to help select patients for the upcoming trial. The pivotal trial, which also will use the Ventana test to choose participants, will follow on a previous study that showed TG4010 was well tolerated and extended survival in patients with normal baseline levels of aNK cells in their blood.—Joseph Haas

Receptos/Johnson & Johnson/Eli Lilly – A little over a year after completing a two-tranche, $25 million Series A financing, San Diego-based Receptos, focused on G-coupled protein receptor drug discovery and development, has finalized a pair of deals with Big Pharma. Financial terms were not disclosed for either deal, both announced on Jan. 6. First, Receptos agreed to a license and technology transfer pact with Johnson & Johnson unit Ortho-McNeil-Janssen Pharmaceuticals. Under that arrangement, Ortho personnel will be trained on multiple GCPR targets and then apply that technology to the company’s internal GCPR drug discovery efforts. Receptos President and CEO Faheem Hasnain called the deal “part of the Receptos plan to enable strategic partners with Receptos technology and enhance industry efforts to pursue rational drug design for this important class of therapeutic targets.” The biotech also aligned itself with Eli Lilly & Co., signing on for a collaboration in which the two firms will research and develop small molecule modulators of an undisclosed GCPR target. Receptos said the two companies will jointly identify potential orally administered candidates for the target and advance them into preclinical development based on shared structure-based drug design efforts.—JAH

Pfizer/Santaris: Pfizer announced this week that it will add an additional 10 molecular targets to a 10-target deal that Wyeth made in 2009 with the Danish biotech Santaris Pharma in the field of RNA-targeted medicines. For that work, it will pay $14 million, about the same Wyeth paid two years ago. Santaris is also eligible to receive up to $600 million in milestones, as well as royalties on sales of any eventual products that result from the collaboration. In January 2009, Santaris received an upfront payment of $7 million in cash from Wyeth, with the U.S. multinational also making a $10 million equity investment in the fledgling biotech. Pfizer said it has advanced several programs under this original collaboration and reached a number of early milestones. -- John Davis and Lisa LaMotta

Pfizer/Seattle Genetics: Pfizer this week also became the latest Big Pharma to license Seattle Genetics's antibody-drug conjugate technology, paying $8 million upfront to use the platform to discover antibodies to a single oncology target. The deal, whose value could inflate to more than $200 million in payments plus royalties if it results in a marketable drug, follows other agreements with GlaxoSmithKline, Genentech, Takeda’s Millennium Pharmaceuticals, and several others, and represents a higher price per target than GSK’s $12 million upfront deal for multiple antibodies, inked in December 2009. Genentech and Astellas also paid $12 million upfront in deals for multiple targets in August 2010 and December 2009, respectively. Seattle Genetics says it has generated $145 million in revenue from ten collaborative deals, with six targets in the clinic and others advancing toward clinical development. Pfizer, which acquired significant antibody-drug conjugate technology of its own when it bought Wyeth in 2009, also agreed to pay Seattle Genetics material supply and annual maintenance fees of unspecified size related to the project. The Millennium collaboration recently yielded highly encouraging results on the Phase II lymphoma candidate brentuximab vedotin, which like other ADCs links an antibody with a payload drug, enabling it bind to tumor cells and deliver cancer-fighting agents directly.—Paul Bonanos