The Effient Launch: Cracking the Door to Primary-Care Marketing

So will personalized medicine be the death of primary care? Maybe not. Maybe just the opposite.

In this edition of the IN VIVO Blog Podcast, Mike McCaughan, our editor-in-chief, gives a decidedly positive (albeit counterintuitive) spin to what some of us in the editorial group thought was a pretty obviously bad piece of news: Effient’s black-boxed approval last July 10.

Yes, Effient (prasugrel) had beaten the competitor, Sanofi/Bristol-Myers’ Plavix, in Lilly’s head-to-head pivotal trial (fewer heart attacks and strokes for Effient’s users, though more bleeding) but still, we wondered, would Lilly – which depends on Effient to get it past the Zyprexa cliff – be able to build much competitive momentum against Plavix while dragging along its black-box warning about bleeding? And even if it manages to gain that momentum, won’t it be stopped dead in its commercial tracks when Plavix goes generic in 2011?

Mike’s notion: that the black-box warning and mandated two-year REMS requirement create the basis for primary-care marketing success – thanks to pharmacogenetics. Not because the data suggests the right population to get Effient – but because it argues that a third of the population getting Plavix get no benefit from it (an argument the FDA evidently agreed with because it added it to Plavix’s label). Lilly reps thus get an FDA-mandated foot-in-the-door to talk to docs about Effient’s risks (and Plavix’s deficiencies)…and, within two years, face a generic with no marketing effort behind it that they will argue doesn’t work in a third of a very high-risk population.

So click below to hear Mike’s full explanation (or you can access the podcast via iTunes).








Image from Flickr user twenty questions and used under a Creative Commons license.

(Final) Deals of the Year Nominee: Lilly/TPG-Axon/NovaQuest

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Aaand, last but not least: It's not just cash-poor biotech firms that need the occasional helping hand to finance their drug development efforts. Even for the likes of Eli Lilly (and, say, Bristol-Myers, which has blazed this particular trail among larger companies), hedging pre-market risk is part of the game plan when cash is becoming more expensive and clinical development and regulatory affairs more uncertain.

In July, Lilly announced an agreement with TPG-Axon Capital and Quintiles Transnational Corp.'s NovaQuest partnering group under which Lilly's partners will pay up to $325 million in development funding for its two lead Alzheimer's disease compounds, a gamma secretase inhibitor and an A-beta antibody, each ready to begin Phase III testing.

In exchange, TPG (which provides the bulk of the capital) and NovaQuest (10% of the funding and strategic development advice) will receive success-based milestone payments and mid-to-high-single-digit royalties on future sales of the two compounds. Quintiles CRO arm will act under a traditional fee-for-service contract. Finally, to sweeten the deal and hedge the risk shouldered by TPG and NovaQuest, those partners will also receive an additional undisclosed royalty on a third, unidentified product that Lilly has out-licensed to a third party. (See our coverage of the deal here.)

Not to show you how the sausage is made, but there was some internal dispute here at IVB over what this deal signifies within pharma, if not its overall importance.

See, on one hand, the deal is forward-thinking and increasingly necessary in a difficult R&D climate; with the cost of capital increasing even for the likes of Lilly and its Big Pharma brethren it allows Lilly the flexibility to take multiple shots on goal in Alzheimer's or other diseases. It's also the first publicly announced deal (we've heard rumors of deals signed but still private) in which a private equity player takes a big financing role in a Big Pharma's development program -- something they've done in small and mid-sized companies (e.g., Symphony Capital) but which Big Pharma has always shunned.

There will now likely be further variations on this theme: former AstraZeneca CFO, now Goldman-Sachs partner Jon Symonds says he's working on putting together a pool of PE capital for developing Phase I and II Big Pharma (and maybe other) compounds, which could be pulled together as soon as January. That structure, incidentally, addresses one of the big problems for PE players (and probably one of the big sticking points of the Lilly/TPG negotiations, which apparently took about a year and a half): how do you put together a marketbasket of enough develop-able compounds to offset the awful odds facing any single on of them. The drug company wants to put as few as possible in the basket; the PE investor wants as many as it can get.

On the other hand, there is something odd about offering deal-of-the-year honors to a Big Pharma company for creative financing to mitigate risk during the year when a lot of people who are supposed to be the experts in this kind of thing are bankrupt, unemployed--or begging the taxpayers for assistance.

And it is especially odd, given that (as we wrote here) Lilly is a model of a Big Pharma company that is focusing on innovative products--rather than diversifying into OTCs or related business like some of its peers. The logic of focusing--that investors want to diversify for themselves, rather than turn their money over to Novartis management to diversify for them--seems to apply here too. Shouldn't Lilly's investors just hedge for themselves, rather than have Lilly management do it for them?

Still, everyone agrees that the deal allows Lilly to shed risk (in return for a smaller reward) in this notoriously difficult therapeutic space in a creative transaction that could prove to be a model for private equity/pharma deals going forward. It's just that we don't agree about whether that's a GOOD THING.

So there you have it--your last IN VIVO Blog Deals of the Year! Nominee. Got it in just under the wire. Why Lilly/TPG/NovaQuest? For the new-model dealmaking, for the sexy private equity angle. For the Controversy!

We'll see you later, at the ballot box.

image by flickr user jacob.theo used under a creative commons license.

Lilly/Imclone: Hedging Payor Risk

Imclone’s Erbitux is a quintessential example of a high priced cancer medication of the type routinely cited by advocates for some form of national comparative effectiveness project in the US.

So it may seem odd to argue that Lilly’s decision to step in and buy Imclone away from Bristol reduces the company’s exposure to a potentially tougher pricing climate in the US.

But in one important sense it does: It gives Lilly about $400 million in annual revenues that are sheltered from any impact of the upcoming debate over price negotiation under the Medicare Part D program in the US.

Like most Big Pharma companies, Lilly’s product line is heavily tilted towards the types of products paid for under the new Part D program: chronic, oral medications like Zyprexa and Cymbalta. And, like most Big Pharma’s with mature product lines, that means Lilly has benefited from a de facto price increase, thanks to the transfer of a lot of use of those medicines out of the price-controlled Medicaid market and into the managed care plan-administered Part D program.

And, like most Big Pharma companies, Lilly is concerned that the US government is about to do something about that.

Here is what Lilly SVP-corporate policy and strategy had to say during FDC-Windhover’s Pharmaceutical Strategic Alliances Conference about the potential impact of a price negotiation model in the US.:

“Eliminating the non-interference clause in the Medicare program could have a significant impact….When the government starts to enter into direct negotiation and they pay for the majority of the drug in the county, inevitably the political pressure and budget pressure will end up damaging the ability of the industry to continue to innovate. So I do have a concern, and I’m not sure that the whole of the biotech industry is perceiving that danger. But we, the big large companies that have experience in working in those countries where indeed there are price controls, I think we have a better perception of what that will mean. And in my opinion it might hurt the willingness of investors to continue to put money into research.”

Erbitux, like most infused biologics, is paid for under the Medicare Part B program. Now there are plenty of opportunities for the government to meddle then—but it isn’t on top of the agenda at the moment.

Interestingly, a lot of Big Pharma companies are modeling the impact of government price negotiation under Part D as about a 3%-4% hit in the US. Lilly’s US business is about $10 billion. How nice to have about $400 million in new revenue coming from a product that isn’t touched by price negotiation…

For some background reading on how price negotiation may translate into real price pressure, start here. For more on how companies approach the two different payor models in the US, start here.

DotW: Barely Hanging On

Ruh Roh, Reorge! The news on Wall Street is grim--just one year after closing at an all-time high of 14,164.53, the Dow dropped another 679 points yesterday to close at its lowest level in 5 years. (In case you're keeping track it's down nearly 40%.) The losses have driven the now not-quite-so-fabulously wealthy to therapy as they seek help for "sudden loss syndrome," a condition we're pretty sure isn't in the latest DSM manual but may well be by the time the fifth edition is released in 2012.

While the biopharma world has been relatively insulated from the turmoil on Wall Street--compared to other industries, most Big Pharma and Big Biotech aren't highly leveraged and have low debt to capital ratios--it certainly isn't immune. (We'll have more to say about this in the upcoming IN VIVO.)

Word is that a certain Big Pharma that went shopping this week had a difficult time lining up its debt financing. It got it--but at a higher rate than it would have a few months back.

It will be interesting to see how Genentech fares given the protracted crisis. Roche still hasn't officially responded to the company's last "no", and some analysts speculate that the Swiss pharma won't be able to finance the deal on favorable terms. Even so, the $89-a-share offer price looks a whole lot better this week than it did just seven days ago. As of Thursday evening, Genentech's shares slid below $80 thanks to general weakness in the market and news that Avastin in combination with partner OSI's Tarceva didn't improve outcomes in lung cancer patients.

Certainly smaller biotechs and specialty pharmas are having troubles. The Danish biotech Genmab announced Wednesday that it's stopping research on zanolimumab and cutting 101 jobs. AtheroGenics, meanwhile, revealed it was filing for Chapter 11, while Mylan's CEO spent much of the week trying to soothe its nervous nellies (also known as investors) after the company's stock price plunged on concerns that the company was too highly leveraged.

Are you inured to the negative news or barely hanging on? Either way, it's time for your weekly ray of sunshine...


Eli Lilly/ImClone: Oh Carl, behave. We admit it--sometimes activist shareholders do add value. ImClone certainly came out smelling like a rose this week. Lilly was, indeed, the mysterious (though not dark and handsome) suitor courting the oncology-focused biotech. In a bid that defies logic, the pharma agreed to cough up $70-a-share or $6.5 billion for the bragging rights to ImClone's interesting but risky early stage pipeline. As we reported in the Pink Sheet Daily, the deal calculus likely wasn't based on the value of ImClone's lead product, the EGFR antagonist Erbitux. After all BMS owns 73% of the rights to the product in the US, while Merck KGaA owns 90% of Erbitux in Europe. But as we all know, it's now de rigeur to be an oncology player if you're a Big Pharma--witness the recent moves of GlaxoSmithKline and Pfizer to that effect. Certainly, Lilly was woefully lacking in this arena, especially in the area of targeted biologics. But Lilly is also paying a premium for a pipeline of drugs that could face stiff competition from rivals that are further along in development. Catherine Arnold, of Credit Suisse, noted in an October 9 report: "We question the magnitude of the pipeline's potential, especially when one considers how crowded the oncology space is becoming (particularly for the mechanisms in question) and the increasingly conservative US regulatory market." Ouch.

Eli Lilly/Dicephera: Lilly had smaller fish to fry this past week as well. Late on Oct. 3, it announced a deal with privately-held Deciphera Pharmaceuticals to gain access to the start-up's preclinical B-Raf kinase inhibitor program. Under the terms of the agreement, Lilly and Deciphera will collaborate in four different project areas with Lilly getting exclusive worldwide rights to any products developed as part of this collaboration. In return, Deciphera will receive an undisclosed upfront payment and two year's research funding and may also receive up to $130 million in potential development, regulatory and sales milestones for each of the four project areas. (Deciphera is also entitled to royalties on sales if any products actually make it to market.) "This collaboration is further evidence of Lilly's ongoing commitment to oncology research," said Dr. William W. Chin, M.D., vice president of discovery research and clinical investigation for Lilly. (Funny, we thought it was evidence of desperation based on a missed user fee deadline for prasugrel and negative news associated with Byetta. Oops, sorry--that was ImClone. Undoubtedly Lilly would say Deciphera is about accessing innovation.)

Summit/The Lilly TB Drug Discovery Initiative: We hope you haven't overdosed on Lilly. This week's feel-good tie-up is a co-development agreement between the UK biotech Summit and the Lilly Tb Drug Discovery Initiative, a public-private partnership created by guess who. Under the deal's terms, the Lilly initiative gains an exclusive license to Summit's early stage, novel compounds in the developing world and will shoulder future research and development costs. In exchange, Summit retains all rights to these compounds for the treatment of TB in the developed world, as well as all other potential indications. In addition, the biotech will have access to the data generated by the initiative and can use it in future sub-licensing agreements. As we noted in the Pink Sheet Daily, that's great news for Summit--someone else pays for development of its drugs, but it still has commercial rights in parts of the globe where patients can actually pay for the meds. In all seriousness, scourges such as TB and malaria exact an enormous toll on the inhabitants--especially children--of developing nations. But market incentives are lacking and that's made it tought to get biotechs interested in taking on drugs for these global health targets. As Chris Earl, CEO of Bio Ventures for Global Health (BVGH) told START-UP, "Even if you made the drugs [for global health] as cheap as possible, the patients still don't have any money." Partnerships like the Lilly TB initiative and the Bill and Melinda Gates Foundation (which we profile in the October issue of START-UP)--as well as novel mechanisms like priority review vouchers--are starting to provide those necessary incentives. Hopefully other companies will follow Summit's (and Lilly's) lead and do well by doing good.

Biolex/OctoPlus: In case you thought we were gilding the Lilly, fear not. (We can't afford the precious metal on our salaries here at IN VIVO Blog.) In the non-Lilly universe, Biolex and OctoPlus also made some noise, expanding the scope of their existing partnership concerning the Dutch company's Locteron. OctoPlus and Biolex have been involved in co-development of the Hep C drug, currently in Phase IIa trials, since 2005. With this latest agreement, Biolex now takes full responsibility for development and commercialization of the drug, funding the work out of the $60 million Series D financing round it recently closed. Octoplus will receive an upfront fee of $11 million, potential milestone payments totaling $138 million, royalties on future Locteron sales, and an equity stake in Biolex of up to 3%. (OctoPlus also retains commercial manufacturing rights to Locteron--just in case you were wondering.) The deal could be Biolex's ticket to a positive change of luck: the firm tried and failed in an attempt to go public in 2007, and Locteron could be the late-stage product it needs to validate its lemna-based LEX technology and attract other big pharma partners.

Mediceo/Alfresa: The merger mania that infected Japanese pharmas such as Takeda and Daiichi now looks to be hitting the wholesale sector in that country. This week, Mediceo Paltac Holdings and Alfresa Holdings, the ichi-dai and ni-dai Japanese wholesalers, struck a $2 billion stock deal to better cope with falling prices and tough competition. Hit by government-mandated cuts for medicines, increased use of generics and loss of negotiating power as hospitals and pharmacies form new ties, the distributors hope to gain bargaining power by creating a dominant industry leader. As part of the deal Alfresa will swap one of its shares for 4.15 shares in Mediceo, according to a release.

Image courtesy of Flickr user azrainman via a creative commons license.

And How Would You Like to Pay for That, Mr. Lechleiter?

Check please?

When Carl Icahn (whom we probably owe an apology since we thought a $70/share bid was a pipe dream) first announced that Imclone had a mystery bidder willing to fork over $10/share more than Erbitux partner BMS, he suggested that bid was subject to due diligence, but not financing.

Well, Lilly must have left its moneyclip in its other pants, because here comes the credit card. And it's too late to play credit card roulette.

Just how easy it will be for Lilly--or anyone for that matter--to tap the credit markets for a few billion dollars here or there remains to be seen. The newly passed-into-law $700 gagillion bailout hasn't exactly greased the lending wheels just yet.

Our comprehensive coverage of the deal is at Pink Sheet DAILY, where Jessica Merrill notes that Lilly "intends to finance the acquisition with a combination of cash and debt. The firm expects the debt portion to amount to $2 billion to $3 billion. With today's tight credit markets, funding deals has become far from a sure thing, but Lilly said it remains 'confident' about its ability to finance the transaction."

Lilly shareholders? Maybe not so much. True it was a particularly bleak day for the markets yesterday (with the exceptions of Imclone, Dendreon, and, probably, Campbell's Soup), but Lilly shares were taken to the woodshed, down nearly 3% on the day. (In comparison, Bristol-Myers was only down 1%, its own fall cushioned by the $1 billion cash it stands to gain from its own 17% stake in Imclone.)

If pharma's rock is the credit crisis, its hard place is the fact that it will likely need to keep spending a ton of cash to access the medicines it has failed to develop on its own. So how will Big Pharmas like Lilly reconcile the two competing realities? Maybe Uncle Sam will help.

Remember the hilariously titled American Jobs Creation Act that allowed companies to repatriate vast sums of cash at much friendlier tax rates? (Ostensibly this was to lead to job creation but in reality the cash flowed mostly unimpeded to shareholders via dividends and share buybacks.)

Pharma has already succeeded in restarting its stalled R&D tax credit, which was tucked into the bailout bill (now known by the gentler acronym TARP), perhaps it is also hard at work lobbying for another AJCA so it can bring home more cash to pay for the alliances and acquisitions it so badly needs to bolster its own R&D.

Meanwhile the debate about whether Lilly paid too much for Imclone will continue. Lilly has clearly signaled its intentions to be part of the upper echelon of oncology companies--along with just about every other Big Pharma--and what you think of Lilly's $70/share Imclone offer will probably boil down to the faith you have in Imclone's pipeline (and Lilly's ability to hang on to the next-generation EGFR inhibitor 11F8).

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

While You Were Advancing

Despite Saturday's game three hiccup the Fightin' Phils advanced to the NLCS this weekend with a 6-2 win over Milwaukee to cap a 3-1 NLDS victory, taking the sting out of another Iggles loss at the Linc. (Celebrate while you can, Ramsey, St. Louis is tough coming off the bye week ... OK maybe not.)

It's nearly enough to take one's mind off the economic crisis--now spreading even further--and the potential impact that broader financial malady might have on the health care world. For those of you keeping score at home more than two out of three of our respondents agree that the industry universe is shrinking.

While you were dusting off your Beat L.A. signs from 1983 ...

• We get a lot of crazy ideas (support of Philadelphia sports teams can do that to blogger) so we're not normally ones to throw too many stones. But we simply can't get our heads around this 'fast track IPO' proposal described in this Guardian article from last week. Please, anyone, explain it to us. Does this make any sense whatsoever?
• OSI and Genentech report that Tarceva plus Avastin didn't improve survival in advanced non-small cell lung cancer patients better than Tarceva alone, though there was a clear improvement in progression-free survival.
• Genome sequencing is getting cheaper. Harvard's George Church, an adviser to Complete Genomics, the company that this morning announced it could lower the cost of sequencing your As, Ts, Gs and Cs to a cool $5k, called the price "shockingly low." In this economy, George? Call us when we can buy a kit at the Dollar Store.
  
• Biolex this morning bought OctoPlus's 50% commercial rights to the companies' Locteron interferon alfa, which is in Phase II in HCV. Octoplus gets $11mm upfront and up to $138mm in milestones. Meanwhile Biolex also said it raised $60 million in Series D funds in a round led by Clarus Ventures.
  
• Oh yeah. It seems Lilly is buying Imclone. You may have heard about this one. But why do we feel like there's going to be a some sort of Scooby-Doo-esque plot twist at the end of this too-long drama? As of 5a ET still no official word from the companies nor any last minute rubber mask reveals or muttering about getting away with it if it weren't for those meddling kids. Yet. [UPDATE: 7am, and it's official. the deal values Imclone at $6.5bb, or $70/share.]
  

game 2 photo from flickr user nickhall used under a creative commons license.

Lilly's "Transparent" Move

Lilly’s May 13 endorsement of the Grassley-Kohl Senate “sunshine” bill (S2029) calling for listing physician payments from pharmaceutical companies shows more about Lilly’s political positioning skills than about the prospects for the bill.

In fact, it looks like a transparent move in favor of transparency. It’s pretty easy to see the advantages that Lilly sees in coming out in favor of the bill now.

At first glance, the endorsement may seem like big news, a break with the general slow, foot-dragging response to the push toward transparency. Most companies have been telling Grassley they will look at making some grants to organizations public but staying away from the full push to “transparency” that would start naming individual doctors. (See “Saying ‘No” to Legislated Disclosure”.)

For Lilly, open support for the legislation fits the current situation and the company’s traditional approach to staying out ahead of efforts to rein in novel marketing strategies.

Lilly has been out on the front of transparency for over a year. The company was pushed in that leadership position in response to allegations that it used grants and payments to physicians to support marketing efforts, primarily for the antipsychotic Zyprexa (olanzepine).

The company put up the first listing of grants on its webpage a year ago at the start of May 2007. That puts it more than a year ahead of the next drug company to make the information public.

Pfizer put its listing of grants up on May 15 right on schedule with a self-imposed deadline. (See Pfizer grants here.) Lilly’s May 13 statement of support, in fact, also has a touch of upstaging the Pfizer postings. Pfizer made its deadline public at least two months ago.

As first off the blocks in transparency, Lilly has no reason not to want the rest of the industry to follow. Lilly has taken the plunge: they want everyone else in industry in the water with them.

By signing on to the Grassley proposal, Lilly follows Zimmer and Medtronic and several other device firms which have similarly come out in favor of the sunshine approach.

Some of the device companies, of course, have also been pushed into transparency as the result of settlements of charges against payment practices for consultants. Once pushed to transparency, it makes little sense to oppose legislation if the legislation makes your competitors follow the same path.

Some companies (most notably Stryker Orthopaedics) have gone the next step and determined that, handled right, physician listing can even be a good tool for cementing relationships with key physicians. Stryker turned the requirement to expose physicians on its head and created a clever, open treatment of its listing of consultants. The open approach leads to a website that is part endorsement, part networking page for its outside consultant physicians (See “Flourishing in the Sunshine: Disclosure as a New Commercial Advantage”).

Lilly also timed its support well. Not only does it take some of gloss off of Pfizer’s move, it is from of no-cost, no-pain support. The Grassley-Kohl bill still faces substantial hurdles to get attached to the Medicare physician payment fix this summer. The payment fix is the best vehicle to get the sunshine bill through Congress. If there is not much chance that the proposal will really get through Congress, then it gives Lilly a chance for some gratuitous support.

Getting out in front in support, also assures Lilly a voice in writing the important final details if the bill breaks through this year. It positions the company as a corporate good guy for the debate if it starts up again next year, in a potentially less favorable environment.

The move to stay out ahead of the other pharma companies on the issue interestingly takes place under a new senior Lilly management team: CEO John Lechleiter just officially took over the top spot at the beginning of last month, the new top policy person, Alex Azar joined the company just under a year ago from the number two position at the Department of Health & Human Services. (See here for background on the choice of Azar to join the Lilly team and here for Azar’s advice to the industry on a legislative strategy.) Several close observers of pharma in Washington see Azar's hand in the decision to work with Grassley.

But the tactic of trying to make the most out of being caught by writing the rules your way is not new to this Lilly team. Lilly has done this before under other senior managers. It is a well-tried and tested approach.

Lilly took the same posture of getting out ahead on working with the government during the industry rush to own pharmacy benefit companies in the early 1990’s. Lilly used negotiations with the Federal Trade Commission on its deal for PCS to help write rules for the entire group of pharma-owned PBM companies. It’s a well-worn path; Lilly is skilled at following the path to its advantage.

Deals of the Week: Deal--or No Deal

The debate over Vytorin's medical benefits and, by extension, the utility of all cholesterol meds, continues to rage. Meantime, the Zyprexa marketing scandal reared its head: new this week, the NY Times reports Lilly is in talks with federal prosecutors to settle investigations into its marketing of the antipsychotic. If an agreement is reached, it could cost the pharma $1 billion, the largest fine ever paid by a drugmaker for breaking federal laws governing a medicine's promotion.

And, it was earnings week, with fourth quarter reports from Wyeth (up, but flat forecast for '08 due to generic Protonix), AZ (down), BMS (down, and WSJ's Health Blog highlights concerns that this big pharma may be affected by the sub-prime mess), Novo Nordisk (down, but did beat analysts' expectations sending the stock up), and Merck (down, thanks to Vioxx settlements) among others.

All in all, a crazy week, but not necessarily on the deal-making front. That's prompted this IN VIVO blogger to ponder the deals that happened--and those that did not. Without further ado, the Deal or No Deal edition.

First, a look at the actual deals that got done...

Inverness/Matria: On Monday Inverness announced its third major acquisition in the health management space, buying Georgia-based Matria for $900 million and the assumption of $280 million in debt. Definitely the big money deal of the week, though Wall Street reacted negatively to the news. Inverness continues to build through acquisition: the Matria deal is its twelfth in the past 12 months. (For more on Inverness's acquisition strategy, click here.) The company's recent emphasis on health management suggests another trend we've been following: the expansion of the diagnostic business model to include services not exclusively related to in vitro tests or reagents. Such business activity has muddied the waters stretching the definition of what it means to be a diagnostic company.

Sepracor/Nycomed: A few weeks ago when Nycomed got FDA approval for its inhaled corticosteroid ciclesonide we figured Sanofi-aventis, the original partner of Altana (bought by Nycomed in '06), still had US rights to the drug--we hadn't heard otherwise, after all. So we were a little surprised on Monday when Sepracor picked up rights to the drug (Alvesco) for $150 million upfront plus various development and sales milestones. Nycomed will also receive payments for manufacturing and royalties on sales. Alvesco's route to the US market has been chock-full of speed bumps. Way back in 2002 Altana suggested the drug might be approved in 2003, but an NDA wasn't filed until December 2003. Altana and Aventis received an approvable letter in October 2004 and the drug was launched in 2005 in Europe.

Iroko Pharmaceuticals/ Merck: Specialty pharma Iroko inked a deal with Merck for non-US commercial rights to Aggrastat, a drug used alongside heparin in patients with unstable angina to prevent cardiac ischemic events. Financial terms of the deal were not disclosed. This is the third product Merck has out-licensed to Iroko and the second in the beleaguered cardiovascular space. Last spring the company acquired rights to Indocin, for rheumatoid arthritis, and Aldomet, a hypertension treatment, from the big pharma. As we reported here, the independent futures of many spec pharmas are in question, as product-poor pharmas gobble them up in hopes of fattening their pipelines. Still, primary care remains a popular space for many, especially as big pharma eschews risky products in the cardiovascular and metabolic disease space.

(Clearly someone forgot the briefcase models.)

BiogenIdec/Genmab: Perhaps we should say "No deal, yet." This week BiogenIdec was once again in the news thanks to manueuvers by Carl Icahn to install three supporters onto the company's board. Also swirling in the ether, rumors that BiogenIdec intends to buy Genmab. Certainly, such a deal would scupper any attempts by Icahn to sell the company to another entity. Adding Genmab's pipeline would go a long way to securing an independent future for the Cambridge, MA-based biotech. But such a deal won't come cheap. In part, because it seems likely that GSK might up the ante. The British pharma, after all, has three partnerships with Genmab, including a very rich co-development, co-promotion deal for the biotech's HuMax-CD20, an antibody to treat cancer and rheumatoid arthritis. Until now, GSK's had no real reason to bring Genmab in-house--it's already got rights to the antibody cow's milk, after all. But it may not be willing to stomach the risk associated with a change in Genmab ownership, deciding its worth the hefty price tag to nail down its rights to its partnered products.

Lilly/Gastrotech: Deal or No Deal? Here's an odd one for you. On Jan 28, Denmark’s Gastrotech Pharma announced it was in-licensing Lilly’s GLP-1 analog GTP 010 for IBS and functional dyspepsia. That’s a deal, not a non-deal, surely? Well, depends on how you look at it. Simply turn it over and you get….a non-opt-in by Lilly.

Lilly and Gastrotech had been collaborating on GTP 010 since 2004, when Gastrotech took over Phase II trials of this Lilly compound in IBS and dyspepsia (in part thanks to the biotech’s ownership of some use patents for GLP-1 analogs in IBS, according to chairman Hans Schambye, though no, that wasn’t mentioned in the release).

That—four years ago--was arguably the real licensing deal. And that was also when Lilly received an option to later take over development and commercialization of the compound in return for milestones and royalties.

This week's news is that Lilly didn’t take that option, which means Gastrotech gets to keep the compound, instead, paying Lilly royalties. “Sure,” Schambye acknowledged to IN VIVO Blog, “you could look at it both ways. Either party could have licensed the drug.”

See? Hmm, exactly. Now ok, we know that small biotechs need all the positive spin they can get, but we're getting pretty close to "Press Release of the Week" territory here. Perhaps Gastrotech will do something big with 010, who knows (Lilly did take an equity stake). But please, a bit of clarity and objectivity wouldn’t go amiss.

The Big Winner in the Vytorin Debacle? It Might be Lilly

Steve Nissen's latest star turn, advising doctors everywhere to stop using Vytorin until there is better evidence it improves health outcomes, is surely going to be a boon for Pfizer and AstraZeneca.

Those companies' good old fashioned statins (Lipitor and Crestor, respectively) will surely pick up a bit of ground in the cholesterol market.

But that is sure to come at a price: If (when?) Congress holds hearings on the Great Cholesterol Coverup (we’re guessing at the hearing topic here), you can bet everyone in the cholesterol class will take some lumps for their aggressive marketing. It won’t help that the Energy & Commerce Committee which is investigating Vytorin is also investigating Pfizer’s Lipitor DTC campaign.

Here's another company that stands to gain: Eli Lilly & Co.

Why? Because the emergence of Steve Nissen as perhaps the most visible critic of pharmaceutical industry practices and products means that people are sure to pay even more attention when he says a drug company did things right.

Here is what Nissen had to say about Lilly's anticlotting drug prasugrel during our FDA/CMS Summit for Biopharma Executives. "The company did a courageous trial against an active comparator and they informed the medical community: What were the benefits, what were the risks, and a reasonable and sensible person can look at that and say I get it.”

"The results with prasugrel were a very good result," Nissen said. "The drug prevented more myocardial infarctions than the bleeding episodes it caused. I think the drug is an advance."

Nissen said more or less the same thing to the New York Times when the pivotal trial results on prasugrel were published, and he has since given more interviews underscoring his belief that the drug should be approved by FDA as quickly as possible.

That, to put it mildly, would be wonderful news for Lilly. The company lost about 15% of its value during the fourth quarter as Wall Street fretted about the mixed data. (The RPM Report has just published more on this topic on our website. You have to be a subscriber to The RPM Report to read our complete analysis, or sign up for a 30-day free trial to get a taste of what you are missing.)

How to Improve Drug Development? Fail Fast!

In this morning’s PSA panel on “Development Dilemmas and Opportunities,” Michael Clayman, MD, VP of Lilly Research Laboratories at Eli Lilly & Co., presented a unique option for optimizing clinical pipeline success. Perversely, it depends on failing fast. Clayman heads Lilly’s Chorus division, an organization that is trying to create a new model for drug development built on not reducing attrition but increasing the chances post-clinical proof of concept that a drug will make it to market. We took an in-depth look at Chorus in May in IN VIVO.

Clayman estimates that 90% of drugs in development will fail anyway, so why devote the time, the resources—the dollars—driving a product forward if it’s not going to make to market? The goal of his group: cut costs, and dramatically narrow the time to a decision point—typically proof of concept in man, what Clayman jokingly refered to today as “pull out your checkbook”—down to as little as twelve months.

It’s a goal Clayman claims Chorus is well on its way to achieving. To date, the company has shown that it can shave 12 to 18 months off the time it takes a drug to reach proof of concept and reduce the R&D dollar spend from $30 million to $3 million.

But, outside these metrics, there aren’t obvious ways to measure the group’s success. It’s not as if the company can use drug approvals as a measure, since the goal of Chorus isn’t to get drugs on the market, but to de-risk them as much as possible. Indeed, it’s an organizational tool to manage Lilly’s vast portfolio of drug products so that the bias is on the ultimate winners. And while nearly 80% of Lilly molecules might be pushed forward according to this program, to date the strategy has been applied to just 10.

According to Clayman, one critical component of the strategy is that Chorus is compound agnostic. No one on the 24-person team has a driving loyalty to a molecule that might sway him or her to push one project forward over another. The group also operates as an autonomous division within Lilly so that it is not hide-bound by the operational infrastructure of the larger organization. “Once a molecule is transferred to us, it’s no longer worked on by Lilly scientists. We outsource the experimentation,” he says.

That level of outsourcing is likely to be troubling to most other major pharmas. It seems unlikely that many outfits would be willing to adopt such a strategy unless there were significant proof that it improves R&D productivity. Until such time, expect the refrain to remain simply Lilly’s chorus.

Who's Sorry Now? Big Pharma Edition

Sparked by today's apology by Bayer at its Trasylol FDA committee meeting, we thought it would be fun to round up a few recent mea culpae out there in pharmaland. I'm sure we've missed some, so let us know in the comments.

• Bayer to FDA Panel: Sorry we didn't let you in on the bad news in that big Trasylol study last year, but what's a little death, kidney damage, congestive heart failure, and stroke among friends? We hope you'll leave Trasylol on the market.


• Novartis to Shareholders: Sorry we haven't been buying back a ton of shares like every other Big Pharma company. We promise to do better in the future!


• Lilly Leaker to Lilly: Sorry I sent the New York Times all those juicy Zyprexa documents last year. I hope $100k covers the damage? PS I'm not really sorry.


• JAMA to GSK: Sorry we're piling on.
  

[Ed. note: As any of you out there who are sports and pharma blog readers may already know, we freely admit to stealing this gimmick from the sports blog par excellence Deadspin. Sorry.]

While You Weren't Working

For those of you in the US, we hope you had a relaxing three-day weekend. Here are a few items you may have missed while sparing a thought for the Noble and Holy Order of the Knights of Labor and/or enjoying a cocktail. Not everyone took the weekend off ...

• Merck & Co said on Sunday at the European Society of Cardiology congress in Vienna that Cordaptive, it's extended-release Niacin plus flushing inhibitor, was effective at lowering LDL cholesterol while raising HDL. Reuters has the full story.
• The Observer takes a look at investor unrest at GlaxoSmithKline, and in particular institutions attempts to get their points across to the company's as-yet unchosen new CEO, who will take the reigns when JP Garnier retires in May 2008. You might recall the Telegraph running something along these lines back in May (and our comments at the time on succession speculation). We'll have more to say on this later in the week.
• The Philadelphia Inquirer weighs in on the state of drug marketing, and finds that drug samples and TV ads help drive uptake of medicines.
• Eli Lilly's new schizophrenia drug may offer safety and efficacy improvements over existing antipsychotics, according to results of a 200-patient Phase II trial. From Nature, via the New York Times.
• Acambis has received FDA approval of its ACAM2000 smallpox vaccine

While You Were Watching the Weather Channel

Dean on the move

A few notes from the weekend that was. Yet again we've dipped into this morning's news, but it was a slow weekend unless you're an armchair meteorologist.

• Made in New Jersey. The NJ Star Ledger takes a look at Wyeth's Alzheimer's disease drug discovery and development programs (The NYT put Wyeth center stage for its own Alzheimer's feature back in June, which we pointed out here). (Hat tip, Pharmalot, where Ed points out that Wyeth's recent spate of troubles may be responsible for its proactive media push.)


• Made in China. Lilly announced early this morning a deal with Hutchison China Medtech, for multiple drug candidates in the oncology and inflammation areas sourced from Chi-Med's herbal medicine discovery platform. Chi-Med will get R&D support and upfront payments on each candidate, plus milestones ranging from $20-29 million per, plus royalties. The release arrived in our in-box at 7am BST, but it looks like the Telegraph had the scoop.


• Made in Heaven. Didja hear the one about Novartis buying Bayer? Pharmagossip helpfully illustrates some real world M&A difficulties.

Image: Reuters/NOAA

Lilly's Shadow Government

Senior Republican staff in Washington are beginning to look for good, safe places to go until the political winds change. One top Health & Human Services official has found that haven in Indianapolis where a number of Republicans have gone previously for respites during a period of Democratic control.

Eli Lilly’s recruitment of the former Deputy HHS secretary Alex Azar continues a long tradition at the firm of offering shadow government posts to well-placed Republican figures.

Azar: Indiana jonesin'

Going back to George H. W. Bush, Lilly has served as a temporary home and launching pad for loyal Republicans. The former President served a three-year tenure on the Lilly board after leaving his final Ford Administration post as CIA director.

Azar, who played a major role in putting his stamp on HHS policy from two subcabinet level positions (first as general counsel and then as deputy secretary) will be senior VP-corporate affairs and communications.

The senior VP corporate affairs position is the very job held for nine years during the 1990’s by the current Indiana Governor and former OMB director, Mitch Daniels. Prior to joining Lilly, Daniels was the political director for the Reagan White House.

All big pharma companies obviously play an active game of political influence and are on the lookout for knowledgeable and experienced Washington insiders, but Lilly’s approach is unique in its focus on an ideological fit. The company appears to be less pragmatic and more idealistic in its choices. Azar, who reportedly marked his departure from HHS with a poignant note about praying for advice on his future choice of careers, fits the mold of idealistic conservative that Lilly likes to groom for higher positions. And, with a president and OMB director to its credit already, the company has not done too badly.

For a company that publicly espouses disdain for government-controlled functions, Lilly has done well with government business. Its antipsychotic Zyprexa always appears among the top products purchased by the government; it was also one of the first products to benefit dramatically from the shift from Medicaid to Medicare in 2006. Medicaid programs were getting more effective at forcing down the price and purchases of the product.

Lilly also has had great access to Washington from Hoosier politicians that it has backed aggressively. During the Reagan Administration, for example, Otis Bowen, a former Indianan governor, headed HHS for three years. During the presidency of George H. W., the firm basked in an Executive Branch headed by a former board member and a former Indiana senator, Vice President Dan Quayle.

Lilly likes to point out that Azar has broad knowledge of a number of key government constituencies: the “agencies under his direction included, among others, the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the National Institutes of Health, and the Centers for Disease Control and Prevention.” Perhaps, more importantly, Azar planted a series of aggressive general counsels throughout HHS. At FDA, for example, Azar worked with Dan Troy, a former colleague from private practice at Wiley, Rein & Fielding.

Bringing a political pro into the corporate structure can raise some practical issues. Lilly tried to move Daniels into a line operating position in charge of the US pharmaceutical business but quickly found that he was more valuable in government relations and policy. He could run the government budget and the state of Indiana but did not satisfy Lilly’s demands for running a drug company.

The Azar appointment, announced on May 4 three months after his departure from HHS, comes soon after one Lilly connection to Washington went sour. Former Lilly Chairman Randall Tobias recently resigned from an assistant secretary at the State Department in charge of US foreign assistance and USAID following inquiries about his participation in the Washington escort service scandal.

A Sleeper of a Deal

Insomnia: more than just another solid film by British writer/director Christopher Nolan. The $4 billion market is one of Big Pharma's thriving primary care playgrounds, home to some of the industry's wackiest DTC ads and a handful of lucrative deals.

Days never end. Nightmares are real. No one is innocent.

Eli Lilly said yesterday it was acquiring the private insomnia-focused biotech Hypnion to help boost its CNS pipeline. Terms of the deal weren't disclosed but IN VIVO has learned the transaction was all-cash and included no earn-outs. While Nolan's 2002 film grossed nearly $114 million we reckon Hypnion probably sold for more than twice that figure, even without having the benefit of Al Pacino or quasi-exotic Alaska locations.

It's not surprising that Hypnion's backers sold out--insomnia is an increasingly competitive space to play in, with large, expensive Phase III development programs (like Somaxon's multiple pivotal trials for Silenor).

Hypnion opted to sell rather than license in the wake of decent Phase II data for its lead candidate, HY10275, which were announced in January. HY10275 is a dual histamine/serotonin (H1/5HT2a) receptor modulator, a mechanism that may allow the drug to avoid scheduling by the FDA/DEA as a controlled substance. Currently marketed drugs, with the notable exception of Takeda's Rozerem (a melatonin receptor modulator) block the GABA-A receptor and according to regulators are potentially abusable.

The vast majority of the company's value was tied up in that compound and its backups & while the company's private investors have supported the company well thus far--it has raised nearly $90 million since inception in 2000--Hypnion was largely a binary bet. Licensing HY10275 would have left little for future public investors to chew on.

Lilly's been active in insomnia R&D at least since it licensed in pruvanserin from Merck KGAA in 2004. Pruvanserin, a serotonin receptor antagonist, is also in Phase II.