Deals Of The Week: The ASCO Edition

ASCO is just moving into full swing, but already the press releases are flying fast and furious. Biotechs have long looked to this meeting as a means to showcase their smarts and increase their profile with public investors. But as big pharmas have set their sights on oncology as the therapeutic area of choice -- given its high unmet medical need and, historically, generous reimbursement, there's no doubt ASCO is now a critical meeting for even the biggest players in the industry.

Like last year, the particular tumor type driving a lot of investor interest at this year's Chicago confab is melanoma. Since presenting robust Phase III data at ASCO 2010 showing a survival benefit for Yervoy, Bristol-Myers Squibb has gone on to win rapid approval for its CTLA-4 inhibitor. This year, investors and clinicians will be watching for new data measuring Yervoy efficacy in pretreated melanoma patients; they'll also be monitoring the data associated with Plexxikon/Roche's vemurafenib, which is pending FDA approval for use in patients with the BRAF V600 mutation, a specific genetic abnormality observed in about 50% of melanoma patients.

As "The Pink Sheet" Daily notes, it's not entirely clear how the melanoma market will shake out when both products are finally on the market. They may be competitors, but given their different modes of action -- Yervoy stimulates the immune system, while the Plexx/Roche drug targets only tumor cells that carry the V600 abnormality -- it's equally likely they could act synergistically. Certainly neither drug on its own works in all patients or offers a long-term cure, even if both extend median patient survival in clinical trials.

Thus, the news June 2 that Roche/Plexxikon would find a way to work with BMS to study the two drugs in combination seemed almost a fait accompli. The press releases issued (from three different companies no less) were long on breathless prose and short on detail: the parties will conduct a Phase I/II study evaluating safety and efficacy of the two drugs in combo, but did not provide more clarity on the trial's design, its timing, or its enrollment. "If appropriate, the companies may conduct further development of the combination," Bristol said in its press release.

You will notice there's also no information on the economic sharing that might come from such a clinical collaboration either. That's hardly surprising. We've yet to see much in the way of financial deets for earlier tie-ups in oncology: AstraZeneca's 2009 alliance with Merck to combine development of their respective clinical-stage MEK inhibitor and AKT inhibitor; or Sanofi's December 2010 deal with Merck Serono to marry their Phase I PI3 Kinase- and MEK-targeting molecules.

Despite the increasing complexity of the oncology market, one in which payers are taking a more active role in controlling costs, such cross-collaboration remains the exception rather than the rule. There are plenty of reasons why: issues around control, valuation, and overlap with other non-partnered products mean it can be tough for two large companies to come to agreement on how to share knowledge and find ways to work together.

That BMS and Roche have found a way to do so can only be a smart thing. The reality is organizations like US Oncology, Cardinal's P4 Healthcare, and Via Oncology are going beyond traditional treatment guidelines recommended by the likes of ASCO and the National Comprehensive Cancer Network, working with payers to provide "clinical pathways" that aim to standardize treatment for a specific disease or tumor type. Aimed for now at treating the most costly cancers, these programs, which are still in pilot mode at major players like Aetna, Blue Cross Blue Shield and Highmark, reduce the wide latitude US doctors have historically enjoyed when prescribing oncologics.

The ultimate impact of these pathways on the biopharma industry isn't yet known, but as we write in this IN VIVO feature, their advent has real consequences for how companies should approach drug development. And while it's very early days to be talking about a melanoma pathway, doing clinical trials to show the merit of your drug in conjunction with a competitor, when it's highly likely to see real-world use in such a combination, just makes sense. (We also wonder how this impacts GSK's Phase III melanoma drugs, its MEK1/2 inhibitor and its BRAF protein kinase inhibitor. Can these earlier stages medicines get traction in the current competitive marketplace? GSK certainly hopes so, and has its own combo trials ongoing.)

Will we see more cross-company clinical stage oncology pair-ups in the future? We hope so. Could such alliances be broader and extend beyond on-offs to a ViiV type arrangement? We're doubtful given the deal making complexities and nearly every pharma's desire to be tops in oncology. But as crazy as that idea sounds, it'd be a clear choice for 2011's DOTY.

In the interim, we always have ASCO (if not Paris) and...

Clovis/Pfizer: Attention biopharma trend watchers! We bring you this news flash of another sighting of that rare bird in the wild: the out-licensing. On June 2, Clovis announced it was licensing Pfizer's Phase I/II Poly (ADP-ribose) polymerase (PARP) inhibitor, PF-01367338, for an undisclosed upfront sum. Under the terms of the agreement, Clovis Oncology will take over responsibility for global product development and commercialization, and in addition to paying the u/f, will owe Pfizer additional downstream fees milestones totaling up to $255 million (pending success in the clinic and commercially, of course). Interestingly, as part of the out-licensing, Pfizer Venture Investments is taking an equity stake in the biotech. (So it's a licensing AND a financing in one blow.) Not that Clovis is hurting in the cash department. Recall Clovis, a START-UP A-lister, pulled in one of the biggest Series As EVUH in 2009. PARP inhibition is, of course, a hot topic at ASCO, and a quick search of the pipeline database Inteleos, shows there are more than a dozen drugs in development against this target, including some that are much further along, including Sanofi's iniparib (Phase III, originally developed by BiPar), AstraZeneca's olaparib, and Cephalon's CEP-9722. The press release announcing the news emphasizes '338 is a "potent" PARP inhibitor, so it's a bit curious that Pfizer would give it up unless its trying to walk the talk of jettisoning anything not first-in-class or best-in-class. (But that raises other questions, including what does Clovis see in the compound?). Separately, Clovis also announced this week plans to develop in concert with Roche an in vitro PCR-based companion diagnostic linked to EGFR mutations.--EL

Johnson & Johnson/AVEO: Months after partnering its lead asset tivozanib in a lucrative deal with Astellas, Aveo has extended its network of partners with an early stage deal with Johnson & Johnson's Centocor Ortho Biotech division. The Cambridge, Mass.-based biotech announced the licensing deal for compounds targeting the RON (Recepteur d'Origine Nantais) receptor - believed to play a role in cancer development - for $15 million upfront May 31. Under the deal, Aveo will receive half of the $15 million in an upfront payment and the rest through a separate equity investment that gives J&J a 1.25% stake in the biotech. Given the early-stage nature of the deal, it's not surprising the arrangement is back-end loaded, with Aveo eligible to receive up to $540 million in development, regulatory and commercial milestones. Aveo will also receive tiered, double-digit royalties on sales of any products stemming from the collaboration. Centocor will be responsible for clinical development, manufacturing, commercialization and costs. J&J will also fund some research to be conducted by Aveo to identify biomarkers for patients most likely to respond to treatment with RON-targeted antibodies. "It is about building out a portfolio," said Aveo Chief Business Officer Elan Ezickson of the collaboration in an interview with "The Pink Sheet" DAILY. For J&J, the deal provides access to what could be an important product in oncology, an area of critical importance to the big pharma's overall business success. -- Jessica Merrill

AstraZeneca/Heptares: (Spoiler alert. No oncology refs in this deal.) UK biotech Heptares Therapeutics signed its third Big Pharma agreement in two months this week, this time with AstraZeneca. The two companies have entered into a four-year research collaboration to discover and develop new medicines that target G-protein coupled receptors (GPCRs). AstraZeneca will have worldwide commercial rights to product candidates emerging from the collaboration, with Heptares receiving $6.25 million in unconditional upfront payments plus committed research funding and future milestones. Heptares will also receive royalties on product sales. Research teams drawn from both companies will focus on a number of GPCR targets known to be linked to CNS/pain, cardiovascular/metabolic and inflammatory disorders. The deal brings to more than $13 million the total upfront money that Heptares has received from its pharmaceutical partners this year, which together add an extra 18-20 months to the biotech's cash runway, according to CEO Malcolm Weir. It also represents further validation for the four-year-old company's technology, which helps stabilize GPCR molecules. That AstraZeneca is modality-agnostic in this deal - purporting to seek both small- and large-molecule candidates - reflects the growing importance of the Big Pharma's MedImmune biologics subsidiary within its overall R&D operations.--John Davis
Johnson & Johnson/Diamyd: J&J's Ortho-McNeil-Janssen (OMJP) signed one early stage deal this week -- and called it quits on another. It was barely a year ago when Elisabeth Lindner, then President and CEO of the Swedish diabetes outfit Diamyd, pronounced on a quarterly earnings call that "a new chapter has begun" as a result of the firm's $45 million upfront licensing agreement with OMJP. That chapter closed on June 1, when OMJP returned all rights to the Phase III GAD65, an antigen-based therapeutic vaccine designed to preserve beta cells in type 1 diabetics. A big disappointment to Diamyd and its shareholders, the news can hardly be called surprising. (We're even tempted to say the writing was on the wall.) On May 9, the two companies reported clinical trial data from a European pivotal study, showing GAD65 failed to meet the primary efficacy endpoint of preserving beta cell function in new diagnosed Type 1 diabetics after 15 months of therapy. Although the company noted "a small positive effect was seen", the data weren't good enough to keep OMJP engaged -- and, importantly, willing to shoulder any additional development costs. Recall the 2010 deal stipulated the two partners would share R&D costs until results of the first Phase III study were available, at which time OMJP had the option to assume full development of the drug candidate. It can't be an easy message to give shareholders, but Diamyd's acting president and CEO, Peter Zerhouni (who replaced Lindner after her abrupt departure in late April) did his best to spin the news positively. "With all the rights to returned to us we are free to decide on how to extract the most value from GAD65 going forward," he said. Whether Diamyd can sign a new partner near term is unclear -- a therapeutic vaccine for diabetes is scientifically risky and it's hard to see a lot of interest after the disappointing Phase III study results. (Even Diamyd doesn't seem that interested. In the wake of OMJP's decision it announced it would shelve a planned longer term follow-up of patients in the European trial.) Investors may have more clarity on GAD65's potential partnerability by end of June -- at the upcoming ADA meeting Diamyd will present data on the European trial, presumably providing greater detail about the small positive effect. There's also a Phase III ongoing in the US due to read out in 2012 and two other externally funded studies that may yet result in the vaccine's resurrection.--EL

DotW: Open Your Mind

To the possibilities...

The week started off on a positive note with the interesting news that AstraZeneca and Merck had come together to conduct a clinical trial combining their two promising but early stage oncology assets. Can you imagine? Two pharmaceutical companies actually pooling assets (see below).

While we are more interested about what potentially could come next--will this lead to future pipeline sharing deals, for instance?--we admit to being impressed by the news, and are almost willing to say that the tie-up counts as one of this year's most interesting deals (the other being the GSK/Pfizer joint-venture in HIV, of course).

Who else opened their minds this week? Shareholders at Biogen Idec seemed swayed by the arguments of "Team Icahn", awarding at least one board seat to the dissident shareholder group. Alex Denner, the managing director of Icahn Partners, will definitely get to participate in regular Biogen Idec confabs. No word yet on whether Richard Mulligan--the other Icahn supporter--has also won a seat at the table. (All we know is someone is taking a Mulligan here.)

Elan investors certainly see the hope of an impending sale after a week that was rife with rumors. First BMS was interested in a minority stake and then they weren't. On Thursday, the Financial Times reported that Pfizer was sniffing around the biotech. It's not the first time the New York behemoth's name has been linked with Elan. Why, pray tell, would Pfizer, still embroiled by the integration of Wyeth, want to purchase the company? Maybe it likes the data associated with Elan's Phase III mAB for Alzheimer's disease, bapineuzimab. Thanks to the Wyeth purchase, it already owns a piece of the molecule anyway. If the data are stellar, why not take the risk and own it all? And if they aren't? We assume Pfizer will be on to its next acquisition target by then anyway.

Novavax may open its mind to taking advantage of the uptick in its share price by raising additional money. Investors have swarmed into the biotech, in part because of the company's novel technology to develop a vaccine for the H1N1 flu strain. An agreement with the National Institutes of Health to evaluate a potential vaccine, announced Friday, only added to the excitement.

See? The possibilities are endless when you just open your mind and read...

AstraZeneca/Merck: Does the tie-up announced Monday June 1 between AstraZeneca and Merck to test a combination of two early-stage oncology candidates represent a more enlightened approach to deal-making? It's too soon to tell given the limited nature of this first collaboration, which pairs Merck's MK-2206, an AKT inhibitor, with AZ's mitogen-activated protein kinase 1 blocker, AZD6244 (also known as ARRY-886) in a soon-to-commence Phase I safety and tolerability trial. MK-2206 is currently in Phase I trials as a monotherapy; AZ's '6244 in a bit further along, having completed several Phase II studies. Both represent the most advanced molecules in their respective classes.

The very fact that the tie-up happened at all is proof that the industry is taking an important step forward in how it thinks about building innovative pipelines (though we would have been more impressed if the firms' business development groups had come up with the concept). In what is sure to become one of the most repeated stories on the origin of a partnership, the pact has its roots in a security line in the Dublin airport back in 2007. Somewhere between removing their shoes and coats and placing their laptops on the X-Ray machine, the two scientists got to chatting about how sensible it would be to collaborate given the increasing importance of combination therapy in oncology. Eighteen months later the deal came to fruition, with the blessing of Merck's chief strategy guru Mervyn Turner and AZ's BD ace John Goddard.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky. Issues related to control, valuation, and overlap with other, non-partnered projects must be hammered out before two large companies can come together in even basic ways. Indeed one reason it may have taken so long to forge this seemingly simple pact is that both Merck and AZ are developing competing MEK and AKT inhibitors. With multiple targets in each pathway and the potential to be used to treat a number of different cancers, the possible variations on a deal (it is not as well known as Brahms's famous opus) were "overwhelming", said Merck's Turner.

As a result, the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program. According to Turner, "We decided, let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says. If the eventual goal is some sort of fixed-dose combination, the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways.--Christopher Morrison

GlaxoSmithKline/Concert Pharmaceuticals: This deal was heavy, man. Just weeks after announcing it had been granted patents by the USPTO, Concert Pharmaceuticals inked a deal with GlaxoSmithKline on June 2 to gain access to the biotech's deuterated technology. The biobucks were sky-high, but the upfront GlaxoSmithKline agreed to pay was quite down-to-earth: just $35 million, which included $16.7 million for equity that was priced at a similar level to shares Concert issued when raising its $37 million 2008 Series C. In exchange, the big drugmaker gets option rights to multiple Concert projects, including CTP-518, a deuterated version of Bristol Myers-Squibb's HIV protease inhibitor atazanavir that is scheduled to enter Phase I trials later in 2009.

Like most of GSK's previous option-deals, the Big Pharma can buy into a program at clinical proof-of-concept (generally post Phase IIa but in the case of '518 post Phase I). Concert will also create deuterated versions of three additional molecules for GSK, and hand those off after lead optimization. The deal's milestones total more than $1 billion and are heavily weighted to the three option candidates, says Concert's chief business officer Steve Bernitz. What's more, the majority of the payments are for clinical and regulatory accomplishment, as opposed to sales-based payments. Concert will get a double digit royalty on compounds from its pipeline and an undisclosed royalty on deuterium-containing molecules from GSK's pipeline.

Replacing hydrogen atoms with deuterium atoms (hydrogen atoms saddled with a neutron) may be the ultimate in life cycle management since it allows for the creation of new chemical entities that get around existing composition-of-matter IP. And it's a low risk approach to drug development, since "it does not change the physical characteristics of a drug," president and CEO Roger Tung, PhD, told IN VIVO Blog. Because deuterium forms stronger bonds with other atoms in comparison with hydrogen due to its greater mass, Tung believes deuterated versions of medicines are likely to be metabolized differently, an important fact that can potentially affect safety, tolerability--and potentially efficacy. While this has yet to be proven in the clinic, it could mean that certain "problem" drugs might be salvaged by the substitution of deuteriums for hydrogen.

Interestingly, given the importance of '518 to the deal, one might have assumed that Bristol Myers-Squibb was interested. Tung confirms that Concert talked to BMS prior to inking the pact with GSK, but it's unclear whether BMS was ever in the running for the compound. BMS's version of atazanavir, Reyataz, remains on patent and will likely still be protected by the time Concert's '518 hits the market.--Christopher Morrison

OrthoBiotech (Johnson & Johnson)/National Cancer Institute: Topping off a busy day Thursday in which the diversified drug maker touted its robust late stage pipeline, Johnson & Johnson's OrthoBiotech division announced a five-year cooperative research and development pact (otherwise known as a CRADA) with the National Cancer Institute. As NCI's involvement implies, the pact is focused on developing novel cellular immunotherapies as potential treatments for a variety of cancers including melanoma. Steven Rosenberg, who is chief of NCI's surgery branch, will help lead the research effort.

The deal is interesting on a number of levels. It continues to show J&J's commitment to doing deals with a wide variety of players, from consortia to academic collaborators to industry groups. As "The Pink Sheet" DAILY notes, this external focus mirrors an industry-wide trend. (Recall GSK's efforts to biotech itself and Lilly and Merck's FIPNet strategies.) J&J's worldwide chairman for pharmaceuticals Sheila McCoy echoed this sentiment in her comments at the drug maker's R&D confab, noting such deals "allow you to diversify. The trend is to look at consortia in certain areas... [There's] a lot of discussion about how to share capabilities." In January , J&J's Janssen unit announced a deal with Vanderbilt University; in March, Centocor signed a deal with the University of Michigan.

Diversity in terms of both molecules and therapeutic approaches is important, but so is curbing risk. And what could be more risky--the apparent success of Provenge notwithstanding--than cancer immunotherapy? NCI's Rosenberg is a pioneer in the field, working in recent years to develop technologies to alter a patient's T cells to express specific immunity against cancer cells. Despite the controversy surrounding the space, OrthoBiotech has also dabbled in cancer immunotherapy, developing an approach designed to stimulate a patient's immune system to recognize and attack cancer cells via the administration of tumor antigens and other materials. Now Rosenberg's lab will conduct a clinical trial in melanoma patients using OrthoBiotech's proprietary technology.

"This public-private partnership represents an extraordinary opportunity to bring together complementary and substantial expertise and resources from two groups with the common goal of advancing a highly promising new modality of therapy for patients with cancer," said Jay Siegel, chief biotechnology officer of J&J's Pharmaceuticals and Medical Devices and Diagnostics businesses.

Microsoft/Merck: Ever since Merck announced in October 2008 the closure of Rosetta Inpharmatics, a genomic-information software company it purchased in 2001 for $576 million, execs have speculated about the ultimate fate of the bio-IT group's assets. Speculation only increased in February after Stephen Friend, Rosetta's founder and one of the prime defenders of these kinds of tools, announced he was leaving Merck to found Sage, a new, not-for-profit, open-source initiative that will develop biological networks across tissues and organs that model disease. (For more see this March START-UP story and this April IN VIVO piece. )

Now we know. On June 1, Microsoft announced it was buying "certain assets"--code for some but not all of Rosetta's powerful software. According to genomeweb's BioInform, the deal centers around Rosetta's Resolver, Elucidator, and Syllego programs, although financial details of the deal were not disclosed.

Why are we covering it? Because the deal marks an important step forward in Microsoft's quest to play in the life sciences. And Microsoft is big enough and creative enough (notwithstanding the ludicrous decision to saddle its new search engine with the unfortunate acronym But It's Not Google) that it must be taken seriously. Microsoft plans to incorporate the genetic and genomic data-management software into Microsoft Amalga Life Sciences, which helps research organizations assemble data from disparate platforms that can be located internally or externally. Merck will remain a contributor as well. According to the WSJ, Merck will provide strategic input regarding the program's use and will become an Amalga customer.

AstraZeneca/Abbott: On June 4, AstraZeneca and Abbott announced a co-promotion agreement for their investigational Crestor/TriLipix compound, as well as their submission of a new drug application with the FDA for the product in mixed dyslipidemia (basically a combination of two or more lipid abnormalities including high LDL-cholesterol, high triglycerides and low HDL-cholesterol.)

The co-promotion extends the two drug makers' existing commercial relationship--the original deal was inked in 2006--ahead of an FDA decision on the combo product, which will be marketed as Certriad if approved. TriLipix, a delayed-release fenofibrate approved in December 2008, is Abbott's play to build on the success of the older fenofibrate brand TriCor.

As "The Pink Sheet" DAILY writes, Certriad is an important product for both Big Pharmas, but especially Abbott given that TriCor will face generic competition in just two years. As part of the agreement, AstraZeneca gains non-exclusive rights to sell TriLipix alongside Abbott in the U.S., excluding Puerto Rico. Abbott agreed to co-promote AstraZeneca's Crestor under similar terms last August.

The American Heart Association estimates that about 34 million people in the U.S. are affected by mixed dyslipidemia. But despite this huge opportunity, the drug will face an increasingly competitive market for similar fixed-dose combination CV products. For example, Daiichi Sankyo is developing a triple combination product combining its antihypertensive Azor with hydrochlorothiazide, and Merck and Schering-Plough have a combination of Zetia and Pfizer's Lipitor in development.

(Image courtesy flickrer mythic_moonlight, used with permission through a creative commons license.)

DotW: The Hype Machine

It's J.P. Morgan time. And as the immortal James Brown sang (or did he shout): "Get on up, Get on up. Stay on the scene, like a hype machine."

Okay, so the lyrics were a tad different. But you get the point. The impending JPM meeting is THE industry confab, and if ever our industry needed a little boost of hype--kind of like Botox--it's now.

A report in Friday's VentureWire confirms what START-UP readers already knew: venture capital needs a plan B. Meanwhile, companies such as Wyeth and Merck are ramping up their diversification spin, in part because of the continued troubles associated with bringing traditional pharmaceuticals to market.

Perhaps it was the holiday break...or perhaps companies felt the need to generate their own buzz ahead of JPM, but IVB couldn't help but notice a torrent of deal-making news this week. (Maybe folks want to get an early start on IVB's 2009 Deal of the Year Award.) Not to toot our own horn, but we weren't just ahead of the news, we made news with the signing of Pharmalot blogger, Ed Silverman. Consider this your official welcome, Ed.

Moving on... at least four companies emerged from stealth mode this week: Anaphore, FORMA Therapeutics, Kolltan Therapeutics, and Satori, and its likely these companies and their backers will find their dance cards full in San Francisco.

We suspect the JPM presentations of Wyeth, Genentech and Roche will also be packed. Genentech and Roche because people are still itching to know if the biggest potential deal of 2008 will actually come to fruition in 2009. Wyeth because of news leaked earlier this week indicating its interest in vaccine maker Crucell.

But until the full assault on your liver begins--we know you really go to JPM for the presentations (wink wink)--we bring you this interlude. Our own analysis of the week's hype, pulled together by an able team of writers from "The Pink Sheet" DAILY, PharmAsia News, and the greater IN VIVO Blog team.

UCB/Wilex: In a deal structure that might best be described as double-jointed, Belgian pharma UCB and German oncology-focused biotech Wilex have entered a risk-sharing partnership in which Wilex will develop UCB’s preclinical oncology pipeline with UCB holding repurchase rights for each program. Under the terms, UCB has granted the rights to five preclinical oncology programs to a new legal entity wholly owned by UCB and funded with €10 million. Wilex, in turn, will acquire the entity in a process that involves issuing about 1.8 million new shares. As a result of the deal, UCB will own 13 percent of Wilex. UCB can buy back the programs after first clinical feasibility studies finish, and take over development and commercialization, in which case Wilex would get milestone payments and royalties. If UCB opts not to re-purchase, Wilex keeps rights and pays milestones plus royalties to UCB.
The shrewd risk-and-cost-sharing arrangement helps UCB handle its delay of the rheumatoid arthritis drug Cimzia, stalled earlier this month by a complete response letter from FDA. UCB said the collaboration will enable it to focus on its own R&D priorities, especially central nervous system and immunology therapies. Reminiscent of prior deals between Genentech and Xoma and Lilly’s risk- and reward-sharing deal with India’s Nicholas Piramal, the UCB/Wilex tie-up may provide a template for future deal-making in the industry--Joseph Haas.

Johnson & Johnson/Vanderbilt: Dealing with last year’s loss of exclusivity for its schizophrenia drug Risperdal, Johnson & Johnson is turning to an academic partner in an effort to develop novel therapies for that disease. What’s unique, though, is that Vanderbilt University’s Program in Drug Discovery will advance the collaboration’s compounds to the IND stage before J&J affiliate Janssen will step in to continue development. As reported by Reuters and the Wall Street Journal, Vanderbilt gets $10 million upfront from J&J in exchange for exclusive worldwide license to compounds university researchers have developed to target a neurotransmitter receptor. J&J will fund research for three years, during which time it will have the option to license new discoveries produced by the effort. Per the agreement, Vanderbilt could realize up to $100 million in milestones through the collaboration. J&J, which has launched its own generic version of Risperdal along with a long-acting formulation of the drug, may be especially desperate to find new schizophrenia candidates, since its own candidate, paliperidone palmitate, has been stalled at FDA due to a “complete response” letter--Joseph Haas.

Alnylam/Cubist: We can only assume that having won our 2008 Deal of the Year award for their tie-up with Takeda, execs at Alnylam are addicted to the rush. The RNAi licensor extraordinaire starts the year with more news: a co-development and profit-sharing collaboration for its respiratory syncytial virus program, including Phase II candidate ALN-RSV01. In a Jan. 9 note, Rodman & Renshaw lauded the deal, noting its similarity to the Alnylam/Takeda deal. Cubist, which has launched its once-daily anti-bacterial Cubicin with seven commercialization partners worldwide, will pay Alnylam $20 million upfront for worldwide commercialization rights to the RSV program, excluding Asia, where Kyowa Hakko Kirin holds rights. Alnylam also could receive development and sales milestones up to $82.5 million along with double-digit royalties. Alnylam is currentlyinvestigating ‘RSV01 in adult lung-transplant patients, but the larger opportunity is children and high-risk adults. AstraZeneca’s Synagis, an RSV prophylactic, is nearing blockbuster status--Joseph Haas.

Merck/Galapagos: Belgium’s Galapagos, already partnered with Lilly in osteoporosis and Boehringer-Ingelheim in autoimmune disease has struck a target discovery platform deal with Merck to seek novel therapies for obesity and diabetes. Merck, which has been aggressive in lifecycle management efforts for top diabetes products Januvia and Janumet, will pay Galapagos €1.5 million upfront ($2.01 million) along with discovery, development and regulatory milestones that could pass €170 million ($228.3 million) for multiple products. For any product that reaches market, Galapagos will also be eligible for unspecified sales milestones and royalties. Using its proprietary SilenceSelect platform, Galapagos will perform preclinical research on targets selected by a joint screening committee. Merck then will have the option to take candidates produced by this process into development, although Galapagos may perform some Phase I clinical studies and will retain development and commercialization rights to any compounds Merck does not pick up. The back-end loaded nature of the deal shows the power Big Pharma partners have to set deal terms in the current environment. However, we aren't surprised to see Galapagos in the news since it's one of Europe's star biotech companies--Joseph Haas.

Endo/Indevus: Endo’s $370 million acquisition of Indevus will enable the former to move into new therapeutic areas while helping the latter get its hypogonadism injectable, Nebido, to the finish line at FDA. Nebido, a long-acting testosterone product, has been held up at FDA due to safety concerns about injection-related cough. Endo's purchase involves more than half of the $632.9 million it had on hand as of Sept. 30, and also calls for $267 million in milestones. The goal of the combined company is to create a specialty powerhouse, with sales force teams dominating in three areas: urology, enodcrinology, and pain. Currently Endo markets overactive bladder therapies Sanctura and Sanctura XM, advanced prostate cancer drug Vantas, central precocious puberty drug Supprelin LA, and hypogonadism product Delatestryl. Indevus plans to resubmit its NDA for Nebido by the end of this quarter and says FDA ultimately will be comfortable with the drug’s risk-reward profile--Randall Osborne.

Roche/Plexxikon: In its second major deal with Roche, Plexxikon gets $60 million upfront and the opportunity for $275 million in milestones plus double-digit royalties in exchange for worldwide exclusive rights to PLX5568, an Raf kinase inhibitor in Phase I for polycystic kidney disease. Plexxikon expects to begin Phase II study of ‘5568 this year and notes about $100 million in milestones is tied to development markers. The biotech also gets U.S. co-promotion rights for the compound in indications other than PKD. The high-value deal shows that Big Pharma remain willing to pay handsomely for early-stage assets--a phenomenon we first discussed in this 2006 feature. As "The Pink Sheet" DAILY noted, privately-held Plexxikon, which was founded in 2001, has done an amazing job of raising non-dilutive financing. Still, we can't help but wonder if the firm's venture backers, which include Pappas Ventures, Alta Partners, and Advanced Technology Ventures, are hankering for an exit. If so, it will be interesting to see if the most recent tie-up with Roche limits the biotech's options. In a better financial climate, Plexxikon would have been a perfect IPO candidate. But with the IPO window firmly shut, exit by acquisition is the only game in town. Roche has a history of trying before it buys--GlycArt, anyone--but if it doesn't bite, other Big Pharma might be hesitant to pay big bucks for a company whose major programs are already off the table--Emily Hayes.

Onyx/S*BIO: This week Onyx Pharmaceuticals inked a potential $550 million deal with Singapore’s S*BIO to co-develop two Janus kinase inhibitors. S*BIO gets $25 million upfront and can receive up to $525 million in equity purchase, options and license fees over the life of the deal, which covers Phase I candidate SB1518 and preclinical SB1578. Onyx gets rights to develop and commercialize the JAK inhibitors for any indication in the U.S., EU and Canada, while S*BIO, which would receive double-digit royalties on Onyx’s product sales from the partnership, is still free to develop and partner the compounds elsewhere. SB1518 is in Phase I for myelofibrosis, with data expected mid-year, and Phase II expected to begin later in 2009. SB1578 is expected to reach the clinic in 2010--Tamra Sami.

Boston Scientific/Labcoat: UPDATED. Information was missing from the previous edition due to an editing error. Bonus device deal of the week! (Who says we only cover biopharma?) If you are impressed with the sharp color images or photo resolution you get from your printer, imagine using the same technology to paint coronary stents with a thin coating--think less than one micron--of a biodegradable polymer and drug formulation. That's the technology Boston Scientific acquired when it bought Galway-based Labcoat this week. With this deal, BSC is looking to maintain its current market leadership position in drug-eluting stents by employing Labcoat's novel coating technology for its next-generation devices. Boston currently has more than 50% of the US DES market through its unique two-drug strategy that employs both paclitaxel and everolimus on its current Taxus and Promus stents. Concerns raised in recent years regarding the risk of late stent thrombosis from DES have caused companies to look back to the good old days of bare-metal stents. Efforts are now underway to minimize the amounts of drug and polymer necessary to prevent restenosis in such stents. The Labcoat deal represents Boston's first efforts with a bioerodable polymer, which the company plans to employ on its next generation Element stent platform. Labcoat's approach applies the polymer and drug--and only small quantities of both--to the outside of the stent, thereby minimizing the amount of both substances on the stent's inner surface where endothelial cell growth is required for healing. Moreover, as the polymer degrades, the end result is a bare-metal stent--Steve Levin.

DotW: Broken Record

The news just keeps getting worse: the economy is bleeding jobs and the band-aid that is interest rate cuts will likely do little to stop the hemorrhage of foreclosures and late mortgage payments. While executives from the Big 3 drove to Washington in their green cars to beseech Washington for a bail-out, reports from biopharma land were equally depressing. (So much for a recession proof industry.)

Your broken record, bad news round-up sounds something like this: Sanofi Aventis announced it was cutting hundreds of sales reps in the US (the ax fell in France some months ago), adding to the growing list of pharmas scaling back on their commercial organizations. Meanwhile BMS laid off workers at its Dewitt manufacturing plant and the outlook for Merck remains...murky after this week's guidance update. (Maybe the company should team up with Schering-Plough to find a way to use Zetia as an alternative fuel source. Now that's innovation--and a way to get rid of excess inventory.)

As Big Pharmas struggle with their lack of research productivity, Goldman Sachs offers a ray of hope, according to the Financial Times: the London firm is apparently in talks to provide hundreds of millions of dollars of funding to a large pharmaceutical company--and it's not AstraZeneca--to create a hybrid R&D model built around the co-development of certain medicines. Hmm, could this be a step forward in the evolution of pharma's business model?

It's not just pharma that needs a new business model. Trouble appears to be brewing in the VC kingdom as well. Rumors continue to abound that limited partners--hit hard by redemptions--have asked various venture firms to delay capital calls while they right their alternative asset allocations. Meantime, Venture Wire is reporting that Sofinnova Partners, which managed to raise a significant portion of its 6th fund, did so with an increased number of LPs, suggesting that even when investors could be swayed to part with their money, they weren't willing to ante up as much as in prior years.

Tired of this monotonous drum beat? We are too. Thankfully it's time for...


J&J/Mentor: J&J is buying aesthetics leader Mentor for $31 per share--or $1.07 billion. They win this week's award for biobucks and curry favor for their recessionista outlook, as they aim to snatch up good assets on the cheap. Since September '08, Mentor’s stock has declined from around $28-per-share to just $16.15 the day before the Dec. 1 announcement. The tie-up makes a lot of sense, given that 90% of Mentor’s revenues come from its breast implant business, and the current plan is to incorporate Mentor firmly within J&J's Ethicon surgery division. Even before the effects of the sub-prime mortgage crisis were fully felt, aesthetic (and other elective, out-of-pocket) procedure volumes had begun to drop. In a depressed economy, Mentor’s large, diversified parent cushions it from the downturn, allowing it to build up its portfolio of office-based products for plastic surgeons and dermatologists—dermal fillers, skin care products, and lipoplasty products. J&J gets into a business that’s adjacent to other core skill sets—surgery and wound care—with good long-term growth prospects. Consolidation in the industry had already begun in early summer—when the industry saw the takeout of LipoSonix by Medicis Pharmaceutical, and the merger of Thermage and Reliant. Now, while shoring up Mentor’s defenses, the J&J acquisition removes a major consolidator from the aesthetics field, at a time when small companies in the space will have a tough time weathering the financial crisis--Mary Stuart.

Novartis/Evotec: Not every Big Pharma is going to Chindia to outsource its R&D. This week comes news that Novartis has teamed up with the Germany-based biotech player Evotec in an early stage research collaboration to identify and develop small molecule therapeutics. As part of the collaboration, which will run for three years, Evotec will be responsible for programs up through preclinical development, with Novartis taking over responsibility--and cost--for the project once the molecules enter human testing. The money certainly isn't huge--for it's cutting edge science, Evotec garners an undisclosed milestone payment and preclinical and clinical milestones that could exceed a whopping $28 million. (Novartis will also pay royalties on sales of any marketed products resulting from the collaboration.) But in these straitened economic times, that's not chump change either, providing the German biotech with important non-dilutive funding to drive forward its four clinical programs--including EVT 201, a partial positive allosteric modulator (pPAM) of the GABAA receptor complex for the treatment of insomnia. Jorn Aldag, president and CEO of Evotec, positively bubbled in a press release announcing the news: "We are excited to be leveraging our drug discovery expertise with such a world class company."

Cephalon/Alkermes: Cephalon and Alkermes parted ways on the future prospects for Vivitrol, a monthly injection for alcohol dependence launched in 2006. Alkermes announced Monday that it had acquired full commercialization rights to the extended-release injectable suspension formulation of naltrexone. The deal was nearly a wash for both parties: Cephalon will pay Alkermes $11 million to cover losses related to the product over the next 12 months, while Alkermes will transfer $16 million to the Bristol, Pa., firm to purchase manufacturing equipment. With its strong cash position--Alkermes has nearly $426 million in cash and cash equivalents currently--the company says it plans to continue marketing Vivitrol on its own, with a 12-month commercial strategy of increasing utilization among doctors who already prescribe the drug, streamlining product access and reimbursement, and enhancing continuity for patients transitioning out of the treatment setting. But driving adoption has been difficult, in part because historically the problem has not been recognized as a treatable disease. Alkermes' VP of Corporate Communications Rebecca Peterson puts it this way: "Standard operating procedure was not to use medication [to treat alcohol dependence]; that is changing over time." But even if doctors and payers are more willing to entertain the idea that alcohol addiction can be treated with a pharmalocologic agent, it's likely Alkermes will need every person on the 70 person Vivitrol commercial team it now controls--especially the 55 sales reps--espousing the message at detox centers in order to boost prescription sales. In "The Pink Sheet" DAILY, Peterson admitted that Vivitrol sales have not been "as robust as maybe we had originally expected," adding that the product's main challenge was not in the areas of reimbursement and payer acceptance.

NitroMed/Archemix: To be fair, this really ought to be characterized as a "No Deal?". News surfaced this week that Deerfield Management aimed to scupper Archemix's proposed reverse merger with struggling NitroMed by launching it's own bid--at a whopping $0.50-a-share-price--for the troubled Lexington, MA-based company. In donning the mantle of "black knight," Deerfield's managing partner James Flynn made of point of telling NitroMed shareholders that it has not been one to "wage contentious public debates." But he also insisted that the proposed NitroMed/Archemix tie-up, which basically exchanged NitroMed's cash and NASDAQ listing for a 30% stake in the newly merged entity, placed Deerfield in an "untenable position." "NitroMed shareholders have been allotted a scant 30 percent of the combined company in exchange for NitroMed's cash," he wrote in a letter filed with the SEC. By Deerfield's calculations, the $0.50-a-share price on the table represents a 200 percent premium to NitroMed's closing share price on Dec. 3. It's also approximately double the price of NitroMed's shares in late October, when the company announced the sale of BiDil to JHP Pharmaceuticals for $24.5 million in cash plus additional payments for product inventory. Deerfield's proposed price for NitroMed represents its own calculation of what the biotech would be worth if it continued to sell off the combo heart medication BiDil as planned and then wound down the company, distributing the cash to existing shareholders. Certainly, the news comes at a time when many private biotechs are looking at potential shell companies such as NitroMed as attractive acquisition candidates in order to access non-dilutive cash. Remember Replidyne? But as we've argued in previous posts, even successful companies such as Infinity and MicroMet have been hard pressed to pull off a successful reverse merger event. It's hard to say what's next for Archemix--the company is saying nada publicly about the news. Certainly it could face a tough and very public battle, one that leaves its new investor base less inclined to stick around in a turbulent market. It's possible the company could try the reverse merger route again, with a different troubled entity (We hear Cell Genesys has a lot of cash and little in their pipeline after the official termination of its deal with Takeda). Or maybe Archemix will opt to stay private--there's really no benefit in being public these days anyway--pushing onward with the roughly $20 million it has on hand.

Photo courtesy of Flickr user william kunz through a creative commons license.

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.

While You Were Debating

We know you spent the weekend discussing the liklihood of a Phillies' sweep in the NDLS. I mean, what else could possibly merit your attention?

Well, there was that face-off in Oxford, Mississippi between two Senators both trying to look presidential. Congressional leaders and the Bush administration also agreed to the terms of a revised $700 billion bail-out package that will be voted on today in the House. And of course, there was Tina Fey--what's the word I'm looking for? Oh, yes...mocking--there was Tina Fey mocking Sarah Palin's recent girl-talk with Katie Couric. We can't wait for Thursday night's confab with Senator Biden.

Meanwhile in our own industry, a mostly quiet weekend was interrupted by the following newsmakers:

* Regeneron and Bayer HealthCare announced positive Phase II results with their VEGF Trap-Eye in patients with wet AMD at the 2008 annual meeting of the Retina Society in Scottsdale, Arizona.

* FDA delayed for a second time its decision on the approval of Daiichi Sankyo and Eli Lilly's blood thinner, prasugrel (Effient). FDA's decision, which the companies announced after the market closed, drove Lilly shares down $1.81, or 3.9%, to $45.01 in after-hours trading. At least one analyst wasn't fussed about the drug's potential approval: Catherine Arnold of Credit Suisse group, wisely noted that "no news is no news."

* Anemia drugs continue to draw fire. This time US regulators are reviewing the use of anemia meds from Amgen and J&J in stroke patients after a German study linked a J&J version to increased deaths.

* The WSJ reports that more than a dozen non-governmental organizations pledged more than $400 million to improve access to clean water and sanitation in the developing world. The effort, dubbed the "Global Health Mega-Commitment on Water and Sanitation" for the Clinton Global Initiative, aims to reach 8.5 million people and provide a billion liters of clean water to developing areas over the next several years. Among the most visible donors: Napo Pharmaceuticals Inc, with a $300 million pledge for anti-diarrheal drugs over seven to eight years in parts of Africa and the actor Matt Damon.

* The turmoil in the market could spell trouble for M&A according to the FT. Deals at risk, according to the paper, include our favorite deal to expound upon: the Roche-Genentech tie-up. (Hey, it's been a couple of weeks since we mentioned it here on the blog.) We aren't sure if it's fair to blame paralysis in the markets for Roche's unexpectedly slow response to Genentech's polite but chilly "Thanks, but no thanks" from a few weeks back.

(Photo courtesy of Flickr user mrdorkesq through a creative commons license.)

J&J Tests FDA's Pain Threshold with Tapentadol

One line in Johnson & Johnson’s press release yesterday announcing the submission of a New Drug Application for the pain therapy tapentadol caught our eye:

"More than 1,800 patients have been treated with tapentadol IR tablets in clinical trials to date."

Which got us thinking: what makes J&J think they can get a new-ingredient product approved as a pain killer at today's FDA with data on only 1,800 patients? Haven't they noticed how tough it is to get new drugs through FDA, especially in the pain category?

Here are some possible answers:

(1) They are self-absorbed egotists with unfounded views of their own power and infallibility. But that can't be it, can it?

(2) J&J thinks that FDA will relent on pain products in the next year or so. It never hurts to be optimistic, but we haven't seen any signs of that yet.

(3) The product is for limited indications; J&J has a risk management program that will assure that it will stay in that population and they will sell the program to FDA as well as the drug’s safety.

Well, the press release says the product is for "moderate to severe pain" supported by studies in "patients undergoing bunionectomy surgery or for patients with degenerative, end-stage joint disease of the hip or knee," supported by a third study in "outpatients with low back pain or pain from osteoarthritis of the hip or knee." So it sure sounds like J&J is going after a big market based on relatively small studies. Not exactly a recipe for success by cautiously selecting a sub-population.

(4) There is something different about the way this product works which means that it will have no safety or abuse issues.

It surely doesn’t sound that way in the press release. J&J says it has "a unique profile with two mechanisms of action, combining mu-opioid receptor agonism and norepinephrine reuptake inhibition in a single molecule." That may be a great profile, but from a safety perspective it suggests a higher burden on J&J to show that the drug is free of two different potential risk profiles.

As for efficacy? According to J&J "data from these clinical trials suggest that tapentadol has efficacy comparable to strong opioids."

Is this a winning profile at today's FDA? We'll all find out later this year.

Cardiovascular Systems Antes Up

IN VIVO Blog heard some muted, but optimistic tones about this year's device IPO market at the JP Morgan conference. But Cardiovascular Systems Inc. must have heard a ear-splitting rendition of "Happy Days Are Here Again" that convinced it to file for an $86.25 million offering.

Don't get us wrong. The filing pleased as well as surprised us. We’re pleased because we identified Cardiovascular Systems as one of our notable Series A deals of the year in 2006. Imagine the sound of us tooting our own horn here.

But we’re surprised because, well the company just started selling its Diamondback 360° Orbital Atherectomy System, a minimally invasive catheter system for the treatment of peripheral arterial disease. That's because the FDA just granted Cardiovascular Systems 510(k) clearance in September.

In fact, the company says it “commenced a limited commercial introduction of the Diamondback 360° in the United States in September 2007.” By the end of the year the company shipped more than 1,700 single-use catheters to 57 hospitals and generated revenues of approximately $4.6 million, according to the S-1.

That’s a nice start, no doubt. But is it enough to go public on?

IN VIVO Blog says yes. Here's why.

Hedge Fund Maverick Capital, with 15% of the company, is among its biggest investors. Maverick is increasingly well regarded as a patient investor in start-ups, but when a company pursues a public offering the firm--with a reported $9 billion or more under management--can bring its considerable public market-oriented resources to bear. If Maverick isn't investing in the IPO itself, it already has a pretty good idea about who will.

Easton Capital is another large investor. A few years ago, Maverick and Easton seemingly brought another cardiovascular company to the public markets way too soon.

That company, Conor Medsystem Inc., also didn't have revenue or FDA-approval for its drug-eluting stent technology, giving an opening to critics who thought the company was unwisely testing the IPO market in 2004. Conor did spectacularly well in the IPO and post-IPO performance, well enough on the public markets to be acquired by Johnson & Johnson acquired the company for $1.4 billion, admittedly with disappointing results but also some new hope.

Some may see Cardiovascular Systems filing as an unwise move or the issuance of a 25-page "For Sale" sign. IN VIVO Blog, however, will be betting on an IPO.

Photo 'A Roll of the Dice' by Flickr user Darwin Bell used under a Creative Commons license.

Amgen Braces for Another Review of EPO Safety: How Bad Will it Be?

Investors loved what they heard from Amgen CEO Kevin Sharer at the JP Morgan conference in San Francisco.

The stock price jumped nicely when he announced that the company’s cost-cutting plan is paying off already, with earnings per share for 2007 expected to come in well above Amgen’s revised guidance—and in fact almost in line with the low end of the company’s original forecast for the year before the EPO disaster unfolded.

Investors also responded to Sharer’s assurance that EPO sales have stabilized now that the market has had time to adjust to new restrictions on coverage imposed by the Centers for Medicare & Medicaid Services in the chemotherapy induced anemia market.

You have to feel good for people at Amgen to see a bit of positive news after a dreadful year. (How bad was 2007 for Amgen? The 5% jump after Sharer’s January 8 presentation brought the company back within range of $50 per share—which is where the stock was five years ago. Ouch.)

What we took away from the presentation, though, was not quite as rosy. The company is bracing for another potential hit to the EPO franchise when it goes back before the Oncologic Drugs Advisory Committee to review still more negative safety data about EPO. (Amgen markets epoetin as Epogen and darbepoetin as Aranesp; the company also manufactures Johnson & Johnson’s epoetin brand Procrit.)

It was ODAC that really started Amgen’s headaches in 2007 when it made unexpectedly harsh recommendations about restricting use of EPO, so there is obviously reason for Amgen to be nervous.

Sharer stressed that Amgen is prepared for ODAC and urged investors to focus on how the company fared during a Cardio-Renal Drugs Advisory Committee discussion of EPO safety in the kidney failure market, rather than the ugly discussion that took place during an ODAC meeting in May.

But he also kept mentioning the meeting.

When he said “the ESA revenue picture is stable,” he added, “but obviously the dialogue isn’t over.” Then he talked about the timing of Amgen’s annual business review, which was supposed to take place in February—but, Sharer said, will now be “in the June timeframe.”

Why? “We want to make sure our team is fully focused on giving the very best preparation for the March ODAC. If we have the business review as we originally thought in February, that would be a conflict for the same people. I think you as shareholders and I certainly as management want those people focused on ODAC. So we’ll pick another date for you.”

“It will be obviously after ODAC and we will have more to talk about then.”

Hmmmm.

Here’s what we had had heard about the ODAC meeting before Sharer spoke.

(1) It would take place in March;

(2) FDA would in essence be asking the committee to support another relabeling of the drugs to bring the FDA label more explicitly in line with CMS’ coverage policy; and

(3) There would be discussion of additional post-marketing requirements, and in particular a demand by FDA for a placebo arm in a study the sponsors are proposing that would compare the historical dosing paradigm for EPO head-to-head against the intermittent model covered by CMS.

We asked both Amgen and FDA to confirm those details, but both said that they were not in a position to discuss anything about the advisory committee review because the date is not yet set.

Well, it sounds like our sources were right about the March date, at least.

FDA Sides With CMS in EPO Battle; Labeling Change Next

Rep. Stark is smiling; Amgen isn't

Amgen Inc.’s uphill climb to reverse restrictive coverage policies for darbepoetin (Aranesp) just got a little steeper.

The Centers for Medicare & Medicaid Services’ position that it will not pay for use of Aranesp or Johnson & Johnson’s competing EPO brand epoetin (Procrit) in patients with hemoglobin levels above 10 g/dL “is generally consistent with the available data and the published scientific literature.” So says the Food & Drug Administration in a letter sent to two prominent House Democrats: Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.) and Ways & Means/Health Subcommittee Chairman Pete Stark (D-Calif.).

The letter, signed by acting Assistant Commissioner for Legislation Stephen Mason, gives CMS a vote of support the agency desperately wanted. It looks like CMS is making its position stick—and that is a development that should matter to companies across the industry, not just Amgen and J&J. (Why? We have written extensively about that in The RPM Report—including this article just going to press. Not a subscriber? Click here to register for a free trial and check out our coverage.)

FDA’s letter ends any lingering hopes for a quick reversal of the coverage policy, despite an all-out campaign by Amgen and J&J to enlist support in Congress. Amgen seemed to have gained a lot of traction on Capitol Hill, especially in the Senate, where a non-binding resolution urging CMS to reconsider the policy passed at the start of September, and where many Hill watchers expected a binding resolution to be included in a Medicare bill this year.

But one of the critical arguments underpinning the Senate legislation has been the contention that CMS’ policy is consistent with the FDA approved directions for use for EPO. As currently written, FDA’s label says EPO should be used to maintain hemoglobin levels at the lowest level sufficient to avoid the need for transfusions, and not be used once hemoglobin rises above 12 g/dL. Amgen, J&J, and a whole bunch of oncologists think that means CMS’ policy—refusing to pay for use above 10—is inconsistent with the labeling.

CMS has stuck by its position despite the political pressure. But no one knew for sure what FDA thought or what it would say when it finalizes new labeling for the drugs to reflect advice from two advisory committees convened in May and September. (Here is our recap of the situation, including a nifty picture of Commissioner von Eschenbach holding the PDR.)

So Waxman and Stark asked. FDA still hasn’t finalized the labeling, but it did answer the critical question. “The current labeling advises that the hemoglobin not exceed 12 g/dL,” Mason wrote. “FDA considers this to be an upper safety limit for ESA dosing, not a target for therapy. FDA is aware that there has been some confusion about the dosing recommendations in the current approved labeling and will work to clarify that confusion as we complete labeling changes that we are currently discussing with Amgen.” (Amgen is the license holder for both Aranesp and Procrit, so J&J is not directly involved in the labeling discussions.)

“Transfusions are not normally given to patients whose hemoglobin is 10 g/dL or higher,” FDA said. So I guess we know what the new labeling will say--not that it matters anymore, since FDA's letter of support is far more important to the future of the anemia therapies than anything the labeling ultimately says.

Oh, and FDA didn’t stop there. “There is no evidence that ESAs result in improved survival, tumor control, health-related quality of life at any hemoglobin level in cancer patients undergoing chemotherapy,” the agency wrote. “ESAs were approved based on their effectiveness in reducing the need for red blood cell transfusions.”

Don’t expect Amgen to take that answer lying down. But the company has an even tougher road ahead if it hopes to change CMS' mind.