While You Were Winning the NL East!

M-V-P

How 'bout them Phillies! Could we be heading for an intrablog standoff between IN VIVO's Philly and Boston contingents? Only time will tell...

Sorry for the late and skinny weekend roundup; our flight was delayed several hours returning to the UK after the PSA conference and we were too excited about the Phillies victory (and frankly, without an easy internet connection) to post yesterday.

So we'll keep it short:

• Vernalis' and Endo's Frova hits the wall. The migraine drug's second time around at FDA--its supplemental NDA for expansion of its label into menstrually associated migraine--turned ugly over the weekend when the agency sent the companies a surprise "Not Approvable" letter. As one analyst told IN VIVO Blog today, "there's a lot of egg on a lot of faces" at Vernalis and Endo. The companies had been extremely optimistic about the drug's label expansion prospects.

(AP Photo/Tom Mihalek)

What About Specialty?

We've heard a lot at Pharma Strategic Alliance from the Big Pharma, most especially Bristol-Myers Squibb, about externalization and the attractiveness of speciality markets.

But as bigger players look to fill their pipeline gaps with smaller, niche drugs, they're beginning to compete in a market long dominated by the so-called "spec pharma" players, who've traditionally built their businesses by acquiring and selling under-valued late-stage or marketed assets.

"There's a lot of capital chasing the same assets," notes Jeremy Goldberg, Managing Director of Corporate Development at Endo Pharmaceuticals, which has a handful of products for the treatment of pain. "It's measurably more competitive than it was three years ago," he says.

But Goldberg is confident that his company, at least, won't get shut out of the deal-making game thanks both to its focus and it's smaller size. A new product, notes Goldberg, can make a tremendous difference to his company's growth and top-line, an effect that wouldn't be seen in in a big pharma with a $25 billion revenue stream.

When looking to license, "biotechs need to ask who is the right partner for my asset? In pain, it's Endo," says Goldberg.

Okay, fine. But spec pharmas are certainly under pressure to expand into additional therapuetic areas. Look at Shire's willingness to pay $1.6 billion for TKT in 2005 to move beyond its ADHD franchise via access to biologics. How does a company like Endo become the partner of choice in a therapeutic area that isn't pain?

And will a big deal scare off investors who are presumably very focused on the reliable earnings-per-share returns that a typical spec pharma provides?

It's too soon to say. More than likely we'll be discussing a new business model at next year's meeting.

Ouch. The Pain of Pain

The wheels grind slowly but they sure do grind.

After four years of legal wrangling, this morning, Purdue Pharma--one of the biggest private drug companies in the US--and three top executives pled guilty in Virginia court to mishandling the pre-2001 promotion of Oxycontin, the company's blockbuster pain drug. The punishment: $600 million.

Purdue can afford the settlement; it won't lay off anyone, apparently. Except its own top management--the company's president Michael Friedman, one of the executives pleading guilty--is getting the boot and, according to the New York Times, an $18 million fine; likely to follow is chief legal officer Howard Udell, who also pleaded guilty (and, says the Times, is on the hook for $9 million). The final misdemean-er--former research head Paul Goldenheim--left Purdue in 2004 for Transform Pharmaceuticals, which was sold soon after. He'll owe $7.5 million.

The settlement is bad news--potentially really bad news--for other companies in the pain space, in particular Cephalon and Endo. Both of these public companies are being investigated for over-aggressive promotion. If those two companies end up with a settlement anything like Purdue's--and federal and state attorneys are likely to feel pretty good about their chances, given the success of the Virginia US attorney--the picture won't be pretty.

Purdue itself, leaderless now, will drift. The company's hired Russell Reynolds to do a CEO search, but no one's looking forward to that one. Friedman, the first non-Sackler to run Purdue, had spent 20 years building up the trust of the family, hardly an easy group to work for. Indeed, talk about an insider board: Purdue's has members: the 90-plus year old founding brothers, Mortimer and Raymond Sackler; their wives; and the founders' four adult children.

They could bring in an internal candidate--like Ed Mahony, the current CFO, a savvy finance guy who's managed to keep enough cash to pay the fines. Or they could bring on someone from one of the international affiliates. Possibles: John Stewart, a long-time employee who manages the Canadian, New Zealand and Australian businesses, or--less likely given his shorter tenure--Ake Wikstrom, the GM of Munidpharma in Europe.

But no Sackler is likely to step in and settle all this hash. None of the 2nd generation Sacklers have ever managed the company. When times were good, the family rejected many offers to buy the business, or take it public. Now that times are really bad--and now that the family doesn't have a CEO they can depend on--they may just decide enough is enough.

In fact, the whole scandal could really be laid at the doors to the family's often empty offices at Purdue's headquarters: though they approve decisions, they let others watch what is a deceptively simple business. In selling addictive pain drugs, there are lots of complex details to follow. For too long, Purdue's management didn't recognize them; neither did its board.

That complexity colors the benefits of the whole pain strategy. Purdue, like Cephalon and Endo, are in the pain business because they can minimize R&D risk with high-margin reformulations of old and effective pain drugs. But there's no free lunch: the risk they avoid in development they run in the marketplace selling opiates.

Already, many pharma companies--AstraZeneca and Pfizer being two recent examples-- are being roasted for promotional improprieties. With Purdue's blood in the water, the legal sharks aren't likely to grow any less hungry.