JP Morgan Sends A $450 Million Tweet, JPM

Rumours have been circulating that investment bank, J.P. Morgan, could be interested in purchasing a $450 million stake in social networking site, Twitter. That adds up to a 10% stake in the company, valuing it at $4.5 billion - approximately a tenth of rival Facebook. JP Morgan has been raising capital for its new Digital Growth Fund, which aims to target the growing social networking market that Twitter is a part of. Twitter receives more than 250 million unique users each month, more than 100 times that of The Markets Are Open.

Random Observations from the Chaos of the JPMorgan Meeting

It's a hell of a show, the annual JPMorgan shindig, even when its slightly muted by the disastrous economy. We've heard some of Roger's early observations but let us weigh in with a few of our own thoughts. More, uh, serious insight to come at our annual Webinar.

• We're definitely behind the ban on bottled water and any other greenish campaign the folks in San Francisco undertake. This only led us to scratch our heads a bit when we walked into Union Square. How can any environmentally minded folks justify expending the energy necessary to keep an ice skating rink frozen on a sunny, 70-degree San Francisco day. Will this be a refuge for polar bears? According to one observer the influx of conference denizens this week made it seem more like "The Matrix On Ice." Now that's something people would pay to see.
  
  
• Who knew we'd have to travel to balmy San Francisco to learn about freezes and frosts? Stryker executives, speaking at the company's breakout session, confirmed that many hospitals were putting a lid on capital spending. In fact, over half of the hospitals surveyed recently said they'd implemented a freeze or frost. This lead one wiseguy in the back to holler, "What is a frost?!" Okay, we didn't know either. Well folks, a "frost" apparently has become acceptable salespeak for a soft, mushy freeze.

• Biotech CEOs! Need a quick buck? Start printing some T-shirts emblazoned either with "ObamaCare" or "Flat Rounds Are the New Up" or maybe "DRIPFED." Speaking of ObamaCare, popular opinion--at least among those willing to express themselves at the conference--is behind some form of nationalized health care plan in the US.
  
  
• Poor Merck & Co. Not only were they inexplicably bounced from the Grand Ballroom into the slightly cozier confines of the Colonial Ballroom (what, Storage Room B wasn't available, mmmkay?) but CEO Dick Clark was put in the unenviable position of taking the stage to the sounds of Queen's 'Another One Bites the Dust.' Clearly Merck hasn't been doing enough transactions with J.P. Morgan.
  
  
• If we handed out awards (perhaps they should be called Jamies) to the most entertaining presentation, NuVasive Inc. would be a definite nominee and likely favorite. Not too many other companies fit both Jeopardy and Ultimate Fighting into their 20 minutes. And even fewer CEOs have an MRI of their own spine, complete with implants, as their company logo. Yep, that's Alex Lukianov's spine profile that you're looking at. As he noted, he's not only CEO, he's also a client.
  
  
• The Jamie for subtlety goes to Art Levinson of Genentech. As the Wall Street Journal noted, not only did he set the record straight about the helix printed on conference badges, he also sent a subtle message to Roche and other big pharma about the role Genentech continues to play as an innovator. In his 25-minute presentation, he made sure to note the biotech's numero uno status for six of the past seven years as the best place to work according to Science magazine. He also pointed out that in 2007 the company earned the mantle of having the most life science patents issued, more than double what the US government's NIH behemoth were awarded. Nor is he so keen to diversify Genentech's business model. We're loosely paraphrasing here, but he intimated that while adding generic capabilities might be a perfectly good business strategy to hedge risk, if he went to his board proposing that kind of model, it would be grounds for firing. Indeed, it was an elegant performance--and likely his swan song given the rumors circulating about Roche's ability to finance the deal.
  
  
• Sometimes actions do really speak louder than words. Pharmas trawling for innovation have been buying up biotechs and ring-fencing them, running them as so-called independent entities. But you've got to wonder, isn't that really lip-service? In the case of GSK, maybe not. Christoph Westphal did his annual magic at the event, representing Sirtris, a GSK company. Contrast that approach with Takeda, which presented at J.P. Morgan for the first time, and is heavily reliant on the success of its Millennium franchise given the approval delays facing its other drugs. Did Millennium's Dunsire give the pitch? No but she was trotted out in the very limited Q&A session in the break-out room.
  
  
• Someone, somewhere out there did the math for a handful of normally easily accessed receptions: yep, it's cheaper to hire bouncers to keep out the riff-raff than to throw the doors open wide to assorted thirsty bloggers and other varieties of conference lowlife. Cheaper still to cancel the annual Monday night confab at City Hall.

--Ellen Licking, Tom Salemi, Chris Morrison

image from flickr user http2007 used under a creative commons license.

What’s Wrong with Pharma? One Answer from JP Morgan

Sunday night we attended what we now think of as the kickoff to the JP Morgan meeting, the extraordinary concentration of biotech/pharma movers and shakers which is the MPM Capital dinner at San Francisco’s Ferry Building.

The dinner operates as a kind of temperature gauge for the industry; lots of folks with the power to actually do something looking for each other’s opinions and sharing their own.

Our quick sense this year: they were worried. But it was less the conversations that struck us as indicative of the industry angst than the unusually frank remarks of the dinner’s keynote speaker: Thomas Ebeling, once the GM of Pepsi in Germany, the CEO of Novartis Pharma and Novartis Consumer Health, and soon to be the boss of Germany’s largest broadcasting group ProSiebenSat.1 Group.

Ebeling’s a controversial guy. But he’s also got a very pretty broad view of the practical side of the business world. Which was why Ebeling’s theme -- a critique of the drug business – was so compelling.

There were plenty of things he said he liked about pharma (the passion to do good, for one; the extraordinary return-on-sales, for another). But there were plenty he didn’t. Not that the criticisms were particularly novel: you hear many of them in private conversations. But you rarely hear them publicly from one of the business's big shots and never aggregated. Here are the points we can remember (who thinks to take a reporter’s notebook to these shindigs?):

• Some of Big Pharma’s very senior managers (one assumes not excluding the speaker) are very sharp. But there’s a huge fall-off in quality as you get below the top.
  
  
• Big Pharma managers, trained in consensus decision making, don’t take individual responsibility. Not a lot of bold decisions, therefore, likely to get made.
  
  
• Pricing in pharma will change to a pay-for-performance model.
  
  

• This industry – and all its constituents – hates bad news. So rather than confront it, managers generally try to avoid it, exacerbating the problems pharma faces.
  
  

• Given the R&D productivity problems, in-licensing is crucial – but no one wants to say "yes" to them. Everyone will remember the executive who championed an in-licensing candidate that fails after millions in trial expenses. No one remembers the person who said “no” to Lipitor.
  
  
• If that ain't enough to block most deals, the not-invented-here syndrome can help. NIH remains a powerful force in pharma: fundamentally, all R&D heads all want to develop their own drugs.
  
  
• Pharma will evolve to a holding company model – it’s just too complex to run as it is.
  
  

Ebeling finished up his excoriation by answering a question from MPM partner Vaughn Kailian: “If you were appointed CEO of Sanofi Aventis what would be the first three things you’d do?”

The answer must have warmed the hearts of the biotechs in attendance – though the per-company math wasn’t particularly exciting. First, Ebeling would raise $800 million to $1 billion in capital and use the money to buy eight to ten biotechs. Then, because he wouldn’t be able to afford to develop all those products, he’d find Big Pharma partners to help. It’s a shots-on-goal strategy, he said: better 20% of something than 100% of the one asset you can afford to do yourself – and which doesn’t make it to market.

And finally: “I’d find a great head of R&D. Good marketing guys are common; great R&D heads are very, very rare.”

Picture from Der Aktionar Borsenmagazin

While You Were Going to California

Greetings from balmy San Francisco (where our colleague Ellen Licking is taking full credit for the good weather, so if you see her at the JP Morgan meeting do thank her). Your IN VIVO Blog will be well represented at the meeting as will the broader FDC-Windhover team & we look forward to meeting some interesting companies and seeing old friends. Stop us and say hello! And don't forget to buy Roger a (free) birthday drink.

So while you were watching the NFL divisional playoff round ...

• Matthew Herper at Forbes writes about a management shuffle at Merck & Co., where Bev Lybrand, formerly leader of the pharma's Gardisil vaccine business, will move to cardiovascular drugs.


• Eben Tessari at Pharmababble expresses his dismay at Alnylam's Cubist partnership for its RSV project. Our (slightly rosier) report on the alliance is over at Pink Sheet Daily...


• The NY Times takes a look at the wacky and divided world of food safety, where FDA shares responsibility with the dept of agriculture, and where "Frozen cheese pizzas are inspected by the F.D.A., pepperoni pizzas by the Agriculture Department." May we humbly suggest the madness be ended by establishing a new federal Department of Pizza?
  
• WSJ op-ed at first glance argues for naked doctors/nurses, on closer inspection merely advocating for short sleeves.
  
• More voting: WSJ Health Blog among finalists for the best health blog! You can find the link to vote for Jacob, Scott & co. here.


• Hey look, it's an All-Bird NFC Championship game ... go Eagles!

Lesson from the JPMorgan Conference: Exceptions That Prove the Rule

Look both ways before you cross The Street

Roger Longman's earlier post about biotech hype got us thinking about a few conversations we had and presentations we watched last week, the way the financial markets respond to--or don't respond to--the optimism of chief executives, and how sometimes that optimism turns out to be quite warranted.

For example it seems like every year we sit down at the St. Francis on Day One and listen to Celgene chairman/CEO Sol Barer, PhD, promise the world to the room chock-full of investors. This year that promise was more stratospheric growth for the company's blockbuster Revlimid, even in the face of competition from Millennium's Velcade.

And you know what we thought to ourselves this year when a once-again upbeat Barer suggested that "in many ways we are at the beginning of Revlimid's commercialization," then threw up a slide crammed with ongoing or planned studies of the blockbuster and guided that sales at the firm would jump to $1.8 billion from $1.4 billion? We thought well why the hell not? Celgene keeps delivering. Barer didn't even have to mention the company's acquisition of Pharmion to get investors excited; that deal, and Pharmion's products, barely registered during his spiel.

That said, skepticism has to be the default view when countered with the overwhelming optimism that characterizes the hype Roger wrote about last week. And in today's R&D and regulatory climate (the results of which we've well documented) it's relatively easy to be a skeptic. Technologies may be fascinating and drugs may be promising (we heard about our share of fascinating technologies and promising drugs last week, for sure), but in the end most technologies don't end up churning out dozens of drug candidates for one reason or another and most drug candidates themselves fail. That's simply just the way it is.

But then there are the Celgenes of the world. And maybe the Vertexes? We sat down with Vertex Pharmaceuticals CEO Joshua Boger, PhD, at the JP Morgan conference to talk about telaprevir (née VX-950), its leading HCV protease inhibitor. (We won't go into the specifics of the massive HCV opportunity here, but note we've covered the area pretty extensively in the past in this IN VIVO feature and this shorter piece on Vertex's landmark ex-US deal for telaprevir with J&J's Tibotec, among other pieces.)

Vertex's stock has been pummelled by Wall Street in recent months following the interim analyses of its first two large Phase IIb trials of telaprevir last November. Those trials have so far established telaprevir, which is further along than any other experimental direct antiviral in HCV, as a potential breakthrough therapy in HCV. The company's stock fell because even though the interim look suggested the drug would find a place in first line HCV therapy (SVR rate at 24 weeks was 61% in the first trial, 65% in the second), given the confidence Vertex displayed in the molecule's prospects--and the sheer size of that J&J deal--one could be forgiven for thinking telaprevir was going to do better. And then make you a sandwich and wash your car.

And then there are the concerns about the drug's thrice-a-day administration that we have heard from other observers, who suggest that even if Vertex is first to market by a couple years, HCV patients might wait for something more convenient. They've waited for years already, in some cases, why not another year or two?

Boger seemed weary of explaining the fallacy of this argument but gave it a go for us anyway. "There are a lot of amateur market opinions," he said, and people are confusing HCV treatment with HIV treatment: the latter is a chronic, for-the-rest-of-your-life regimen, but the former could be shortened to less than six months with the addition of telaprevir to existing interferon and ribavirin standard of care (currently a 48-week therapy). Vertex's critics "couldn't be more wrong," he said. "This isn't a chronic condition where you take the drugs forever--this is a cure."

Vertex hasn't seen a compliance issue in its clinical trials, Boger maintained, and even if it would be nice to have a protease inhibitor with twice-a-day or once-a-day administration, he said, it wouldn't be as a means to boost compliance. Rather it would be easier to combine a twice-a-day drug with other direct antivirals that could follow telaprevir to the market, such as an HCV polymerase inhibitor.

And as for patients waiting for a better drug, Boger bristled and chalked that up to wishful thinking from competitors. HCV is a case where a drug that makes the first leap in patient benefit will define future drugs' clinical and regulatory pathways, he said, plus take the lion's share of pent-up market demand that will never exist again. "I've never seen a field where the potential of being first to market is this big," Boger said.

Is that more hype? And has Vertex's own hype come back to bite it recently? Maybe, but that doesn't mean they won't succeed with telaprevir. We wouldn't bet against them.

At JP Morgan, Stryker's Big Smile

As he strode to the podium in during last week’s JP Morgan investor conference in San Francisco, Stryker Corp. CEO Steve MacMillan was all smiles. Of course, most CEOs try hard to put on their happiest face at conferences like JP Morgan. But MacMillan—and Stryker—had particular reason to smile.

According to Mike Weinstein’s medtech team at JP Morgan, over the past two years, Stryker has been the second-best performing medical device stock, up 70% over that time. And 2007 was a particularly good year for the company; after divesting its slow-growing—and not particularly core--physical therapy business, the company seems likely to have recorded its seventh straight year of double digit sales growth (final 2007 numbers had not yet been reported by the time of the conference). MacMillan noted that only 14 companies in the Fortune 500 have achieved six straight years of double digit growth, and half of those are retail companies. Stryker’s 2007 year-end sales should reach $6 billion, double what it was five years ago.

Plus, in what was clearly the orthopedic industry’s biggest story of 2007—the settlement of the DOJ investigations into surgeon contracts—all orthopedics companies fared well, but Stryker may have come out smelling best. (See our take here.) Of all of the Big Ortho companies, it was the only one not to have had to pay under the settlement terms, a reward some say for playing a key role in the original investigation.

What next for Stryker? Apparently more of the same. MacMillan cited two priorities going forward: finding opportunities from some recent investments in the company’s sales force and in its R&D, spending on which increased nearly 20% in the past three years over the previous three years, and what he called “a disciplined assessment of potential future platforms.” What does that mean? Not clear. But at last year’s French Orthopedics meeting in February, the hot rumor was a reported acquisition of Smith & Nephew by Stryker. Nothing ever came of those rumors (At least nothing yet, and who knows?) But at JP Morgan, MacMillan himself seemed to suggest that Stryker wasn’t likely to pull off any big deal soon. He said that while Stryker is “opportunistically” looking for new technologies and new deals, the company “doesn’t need to do any deals.” Particularly big deals. Indeed, MacMillan, referring to his relatively recent assumption of the CEO post at Stryker, noted that some CEOs try to make an impact on a company right away by doing a major deal, only to find they’ve done a bad deal. It’s a temptation, he says, he’s strongly resisted and for now at least Stryker doesn’t seem to need.

For more from MacMillan, check out this interview from IN VIVO the Magazine.

Deals of the Week: far from the Westin St. Francis

Attention JPMorgan attendees: we trust you've consumed enough resveratrol to make up for the pickled brain cells. Your steadfast Deals of the Week writer has been keeping tabs from afar and sighing over the gossip missed. (Feel free to drop a line with any juicy conference post-mortems.) Meantime, here's a review of the items you may have missed while talking it up at the Westin St. Francis.

Genzyme/Isis: The deal of the week, and the one generating all the buzz in the Westin hallways and Union Square restaurants was Genzyme's agreement with Isis for the southern California biotech's phase III anti-cholesterol medication mipomersen. As we wrote here, the deal, which included a $325 million up-front, $825 million in development and regulatory milestones, and an additional $750 million in commercial milestones, is a bold statement by specialist play Genzyme to remain an independent entity. Mipomersen, a lipid-lowering compound that targets apolipoprotein B-100, is a weekly injectable being investigated first for the rare, inherited disorder familial hypercholesterolemia (FH). Henri Termeer, Genzyme's CEO, describes the asset in the press release as a “very Genzyme-like product.” No doubt he's also eyeing its possible use in the general population in patients with high cholesterol and at high risk of cardiovascular events who are ineligible for statin therapy.

Pfizer/Tacera: Genzyme wasn't the only company dealing in the biologics space this week. On Monday, Pfizer signed yet another large molecule deal, this time with Tacere Therapeutics for world-wide non-Asian rights to the biotech's RNAi hepatitis C drug, TT-033. (Back in June, Tacere brokered with Oncolys BioPharma for the Asian rights to the same compound.) TT-033 is pre-IND, but that didn't stop Pfizer from agreeing to pay--potentially--more than $145 million in development and commercialization milestones. And that doesn't include the undisclosed up-front fee signed by the two companies. Pfizer has been among the most aggressive of big pharma's biologics acquirers, buying both Coley Pharmaceuticals (vaccine technology) and CovX (antibody scaffolds) late last year, as well as inking licensing deals with Xoma (antibodies) and Direvo Biotech (bioengineered proteins) last fall.

Wyeth/ Mochida Pharmaceuticals: Wyeth was another big pharma betting heavily on a preclinical compound this week. On Jan. 9, the pharma announced a deal with Japanese drug maker Mochida Pharmaceuticals for that company's experimental pain medication, a TRPV1 antagonist. Financial terms were not disclosed, but news reports cited Wyeth paying a one-time payment upon the signing of the contract, as well as milestone payments. In addition, Mochida retains the right to co-develop and market the drug in Japan. TRPV1 antagonists are in vogue within Big Pharma: Eli Lilly and Merck both have compounds belonging to this class in development. As we've mentioned before, Wyeth is not known for its overly aggressive business development team, which prefers early stage licensing deals over major acquisitions. Clearly Mochida's TRPV1 dovetails nicely with such a strategy and adds to the company's pain franchise, which also includes (the recently delayed at FDA) methylnatrexone thanks to a 2005 deal with Progenics Pharmaceuticals. (Though whether the deal can stem some of the pain resulting from last summer's troubles with Pristiq and bifuprenox remains an open question.)

Teva Pharmaceuticals/India: The Business Standard reports that Israel's Teva Pharmaceuticals plans to invest more than $1 billion dollars over the next 24 months buying Indian drug companies and setting up manufacturing facilities. We admit this isn't really a canonical deal of the week, but it does represent yet another example of off-shoring infrastructure, one of our major themes for 2008. (For more, check out the January issue of IN VIVO.) And it's not like this is something Teva is musing about doing. A few weeks ago, Teva acquired over 100 acres of land near Gwalior, Madhya Pradesh, to set up active pharmaceutical ingredient (API) manufacturing facilities that will match the production capacity of India's major generic players Ranbaxy, Cipla, and Dr Reddy’s.

While You Were Going to California

Before the eyes of the healthcare world turn to the overcrowded hallways of the Westin St. Francis, here's a quick roundup of the weekend that was--and it was Quiet. We'll try to post a few missives from the conference while we're here & hopefully we'll meet some loyal readers.

• The San Francisco Chronicle's primer on the JP Morgan health care conference.


• Bad Science has some thoughts on the as-yet-released ENHANCE trial of Zetia, which we wrote about here.


• Reuters reports that Sanofi-aventis is looking for growth in the vaccines market.