DotW: Angst

The mood of the nation is undeniably dark. The turmoil on Wall Street is enough to give even the most steady individual palpitations. And the antics on the Hill--don't get us started. Even Silicon Valley, that bastion of wealth and exorbitantly priced homes, looks to be in jeopardy according to today's New York Times.

Despite the counter-cyclical nature of the biopharma industry and its relative immunity to the widening credit crunch, skies in biopharma land are also far from rosy. Roche still hasn't managed to close the deal with Genentech, but according to the WSJ, remains steadfast that it has the capital it needs to get it done. So what if the two companies haven't agreed on a price? (It's worth noting that if negotiations drag on much longer, the Swiss pharma's original offer of $89-a-share may start to look better and better given the roiling market and the news that Raptiva use has now been linked to at least one case of PML. Hmm. Maybe patience is a virtue.)

Moreover, discussion of biopharma's lack of R&D productivity has been replaced by talk of an "innovation crisis" in certain circles. A small but intrepid group of readers weighed in with their own thoughts: 63% agree their isn't enough innovation to sustain the industry, while 37% remain more optimistic. (Note there's still time to have your say if you haven't already.)

We aren't sure if the folks at Pfizer and Merck see the innovation glass as half-empty or half-full, but we're guessing the former based on this week's news flow. Forced to take a hard look at their pipelines, both Merck and Pfizer responded this week by terminating R&D programs that were suddenly too expensive to justify. In the case of Merck, it was their troubled Phase III obesity drug, taranabant, a close cousin of Sanofi-Aventis’ rimonabant (Acomplia/Zimulti). Pfizer announced an even bigger retrenchment, forsaking early stage R&D in heart disease, obesity, bone health, and other areas, an amazing turn-around for a company's who bread-and-butter has been primary care blockbusters such as Norvasc and Lipitor.

And then there's the news that Lilly is ImClone's mysterious suitor, but not quite ready for its big reveal. In a statement released Wednesday night, Carl Icahn announced that “the large Pharma company has completed due diligence and made a proposal not subject to financing or further due diligence," but has asked ImClone to stay mum about its identity until the negotiations are finished. Oh, Carl you are so coy. It's enough to make a grown person cry.

If your calls for mommy dearest have gone unheard, fear not. We have the antidote for your furrowed brow--and no, it's doesn't call for watching send-ups of Sarah Palin or spiking the water supply with antidepressants. (We're pretty sure that's already been tried.) It's time once again for...


Genentech/GlycArt/Roche: The boards of Roche and Genentech may not be able to agree on a price for Genentech, but that isn't stopping scientists at the two companies from working together. (Isn't it special when family members play nice?) On Friday came the announcement that the South San Francisco biotech was teaming up with Roche's subsidiary to develop GlycArt's GA101 molecule, a humanized, souped-up anti-CD20 antibody currently in early stage clinical trials for various leukemias. As part of the deal, Genentech will record $105 million in R&D expenses as part of its third quarter 2008 results. The three companies will, however, share certain development costs and Genentech will receive US commercialization rights in the US. This is not Genentech's first foray into the development of an anti-CD20 antibody. The company, of course, markets Rituxan, which was developed by scientists at BiogenIdec. But that drug is far from perfect and a certain percentage of patients fail to respond to the antibody. That's allowed next-generation antibody players such as GlycArt, Xencor, BioWa, and GlycoFi (now part of Merck) to develop souped up versions of the molecule using optimization technologies as we discussed here. In fact, this latest announcement may spell trouble for Xencor. Back in 2004, it inked a deal with Genentech to develop a better version of Rituxan using its own protein engineering technologies.

Wyeth/Advanced Life Sciences: It's no secret that public biotechs walk a tight-rope when they sign alliances--the deals give them some necessary cash and validation, but investors don't always like them. How to solve this conundrum? Sign a development pact that's limited to a geographic area of the world. On Wednesday Advanced Life Sciences and Wyeth announced a commercialization pact for ALS's long delayed antibiotic, cethromycin. Wyeth will market the drug, which is related to Sanofi-Aventis's Ketek, in all parts of Asia except Japan, where Abbott Labs has rights to the compound. As part of the deal, Wyeth is purchasing a 4.9% equity stake in ALS and will pay the company milestones and sales royalties based on the future development of the antibiotic. The commercial partnership is a significant step forward for Advanced Life Sciences, which has worked hard to shore up its balance sheet by inking debt and equity financing agreements so that it can remain in business until cethryomycin's approval. Unfortunately concerns that Advanced Life Science's drug may also cause the liver toxicities and patient deaths observed with Ketek use have meant that the antibiotic must complete additional trials before it can be approved in Asia. (Advanced Life Sciences recently submitted the drug to the FDA for approval.)

Ortho-McNeil-Janssen Pharmaceuticals/Advinus: Yet another company goes to South Asia to access cheaper drug discovery and early clinical development expertise. On Tuesday, Advinus, an India-based CRO, and Ortho-McNeil, a division of Johnson & Johnson, announced they were teaming up to develop molecules against a variety of undisclosed disease targets. Historically OMJP's interests have been in pain, infectious disease, and GI disorders, while Advinus has focused on metabolic diseases. Like the previous deal Advinus signed in 2006 with Merck, the agreement with OMPJ gives Advinus responsibility for discovery and clinical work through Phase IIa, at which point the J&J group has the option to advance promising candidate drugs into late stage clinical trials. If it does so, OMPJ picks up responsibility--and the tab--for worldwide commercialization. Deal terms were slightly richer for the CRO this time around, perhaps proof that the company has established itself as one of Asia's service companies of choice. As was the case with the Merck tie-up, Advinus will receive an upfront payment of an undisclosed amount. If it delivers two targets to OMJP, it will receive an additional $247 million plus royalties on sales of any future drug products. (In its deal with Merck, the Indian company gets just $149 million plus royalties on future sales for delivering the same number of targets.)

GE Healthcare/MicroCal: General Electric, GE HealthCare's parent company, continues to get beaten in the market, announcing Wednesday that it would gladly accept $3 billion from Warren Buffett (So would we!). But the financial upheaval didn't stop the med-tech group from acquiring the privately-held instrument maker MicroCal for an undisclosed sum. MicroCal's proprietary platform dovetails nicely with GE Healthcare's existing BiaCore platform, providing scientists with detailed information on the structure, function, and binding properties of biomolecules like proteins and antibodies. The move shows that GE Healthcare continues to eye the competitive tools space, and should give pause to companies like Perkin Elmer and Thermo Fisher. Indeed, the conglomerate has inked four other deals this year alone, including the take-out of Whatman PLC, maker of filtration and cell sample preparation technologies, for $702 million and the recent $990 million purchase of respiratory device specialist Vital Signs. Massachusetts-based MicroCal was pretty long in the tooth despite its private status--it was founded in 1977 by John Brandts, a U. Mass. chemistry professor. The private equity group Riverside Partners, which first invested in MicroCal in 1999, was the instrument maker's primary owner.


Covance/WuXi: Just months after unveiling plans to create a JV for preclinical drug testing services in China, WuXi PharmaTech and Covance have scuppered the deal. When the deal was first announced in June, it was heralded as a positive step for both companies: the Covance name appeared to give WuXi added credibility outside Asia, while the collaboration helped the Princeton, NJ-based CRO access the lucrative China market. But the deal wasn't necessarily balanced from the start: WuXi had committed to building the facilty, and for its work Covance was ponying up just $20 million. Though details haven't been fully disclosed, it seems likely that this imbalance coupled with competing priorities at Covance may have derailed the agreement. Recall that Covance recently acquired Eli Lilly's drug development campus in Greenfield Indiana for $50 million. Our sister publication PharmAsia News has the full story.

image from flickr user 'stuck in customs' used under a creative commons license.

Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

They MIGHT Be Giants

But can they change health care?

The New York Times reports yesterday that IT titans Microsoft and Google were set upon using their individual might to “improve the nation’s health care.”

Try as we might to be impressed by caliber of these indisputable pioneers, IN VIVO Blog is having a bit of troubling mustering anything more than a “ho hum.” Perhaps, if we try real hard, we might push it to, “We’ll believe it when we see it.”

See, we’ve been hearing (and writing about) about this IT revolution in health care for close to 10 years now. Back then Internet entrepreneurs—albeit with shoddy business plans and puddle-deep knowledge of health care—promised to bring the power of IT and the Internet to bear on the $1.3 trillion dollar health care system. The end result? Now many of those same entrepreneurs are promising to bring the power of IT and the Internet to bear on a $2 trillion-plus health care system.Yep, a 50% increase. How’s the might of IT doing so far?

So what’s different today? Well, to be fair, the Internet model is in a lot better shape than it was 10 years ago. Google, which continues to impress us (have you used the Street View feature on Google Maps? Amazing), wasn’t even around, and no one had quite figured out how to make money off the Internet yet. Today, Google’s model and services serve as a foundation for many of the start-ups in this area today. As for Microsoft, IN VIVO Blog won’t pretend we know much about the company other than we use Windows and Internet Explorer. But there’s little doubt the company hasn’t focused on health care up until now because it had much lower fruit to pick in other industries. Hospitals and doctors are notoriously bad customers for IT companies.

Perhaps that’s why both companies appear to be targeting the consumer… er…the patients. Question is can these companies capture some of the juice for a health-care consumer product? (It’s hard to imagine a ready list of drug allergies garnering the excitement of finding a new sushi restaurant on your iPhone.) Here’s what’s reportedly being planned, according to the Gray Lady:

A prototype of Google Health, which the company has shown to health professionals and advisers, makes the consumer focus clear. The welcome page reads, “At Google, we feel patients should be in charge of their health information, and they should be able to grant their health care providers, family members, or whomever they choose, access to this information. Google Health was developed to meet this need.”

A presentation of screen images from the prototype — which two people who received it showed to a reporter — then has 17 other Web pages including a “health profile” for medications, conditions and allergies; a personalized “health guide” for suggested treatments, drug interactions and diet and exercise regimens; pages for receiving reminder messages to get prescription refills or visit a doctor; and directories of nearby doctors.

Google executives would not comment on the prototype, other than to say the company plans to experiment and see what people want. “We’ll make mistakes and it will be a long-range march,” said Adam Bosworth, a vice president of engineering and leader of the health team. “But it’s also true that some of what we’re doing is expensive, and for Google it’s not.”

Bosworth deserves credit for remaining humble, but the question we have is—will all this really improve health care? The profile idea and the prompts sound like window-dressing (web-dressing?). Sure, some people might benefit from an email reminding them to make a follow up appointment, but that doesn’t mean they’ll follow through. As for the personalized health guide, the information is out there and often collected by Web sites like WebMD. How does a simple aggregation of data help? (And when does the notion that Google—which bases its Gmail ads on the content of the messages—will have complete health profile on record stop feeling weird? The assurances that this data will remain completely confidential don’t do it for me.)

Note: Google Blogoscoped, which tracks the behemoth, has previews of Google Health Screen Shots here. Lots of sizzle but not seeing the steak.

Microsoft’s efforts, in contrast, sound a little more grounded—at least initially. Again, from the NYT:

… “It will take grand scale to solve these problems like the data storage, software and networking needed to handle vast amounts of personal health and medical information,” said Steve Shihadeh, general manager of Microsoft’s health solutions group. “So there are not many companies that can do this.”

This year, Microsoft bought a start-up, Medstory, whose search software is tailored for health information, and last year bought a company that makes software for retrieving and displaying patient information in hospitals. Microsoft software is already used in hospitals, clinical laboratories and doctors’ offices, and, Mr. Shihadeh noted, the three most popular health record systems in doctors’ offices are built with Microsoft software and programming tools.

But then the talk veers off into discussion about creating consumer-oriented tools such as online offerings “as well as software to find, retrieve and store personal health information on personal computers, cellphones and other kinds of digital devices — perhaps even a wristwatch with wireless Internet links some day.”

A wristwatch? Perhaps this would work for Dick Tracy. Yes, the current process of sending faxes and letters to get a simple medical record transfer done is onerous. But do we need a wrist watch? Just let me download my records onto a thumb drive and bid me good day.

Yes, IN VIVO Blog has a difficult time seeing all of this having any real impact from these consumer-oriented efforts. They sound great, but will they really make a difference?

While Microsoft and Google bring some much needed buzz to health care’s out-moded record keeping, there are at least two other multi-nationals worth keeping an eye on in the race to digitize health care: Siemens AG and General Electric. Keep in mind that Siemens and GE also have major plays in healthcare IT and they develop the imaging and diagnostic tests that make up the bulk of a patient’s record. Who better to lead healthcare’s digital revolution than the companies that generate the actual data patients—and more importantly, doctors—want tracked. (BTW, keep an eye out for an analysis of Siemens’ IVD approach in the upcoming Sept. issue of IN VIVO.)