Nektar Takes A Deep Breath

Deep breath in. Deep breath out. Nektar execs, have you found your quiet place, yet?

It's been a stressful few months for Nektar employees. The company's 13-year marriage with Pfizer soured last October when the pharma unexpectedly decided to stop selling its inhaled insulin Exubera. True, Pfizer did cough up a hefty divorce settlement--a $135 million forgive-me gift, plus a promise to help with insulin supply and on-going clinical trials. (For more on the future of inhaled insulin, see here.)

Yesterday came the news that Nektar is eliminating approximately 150 positions--110 existing jobs plus 40 unfilled openings--as it restructures the company to "transition form a drug delivery service provider to a therapuetics drug development organization." In addition, the company announced that Hoyoung Huh, the company's COO and head of its pegylation business unit, is leaving to become CEO of BiPar Sciences, an up-and-coming biotech developing oncology therapies.

We've said it before. (No doubt, we'll say it again.) It's a terrible time to be in drug delivery. Making money in this space has always been tough--it's not enough anymore to take an existing molecule and dress it up with a PEG molecule to extend its shelf-life or aerosolize it for delivery to the lungs. Payers and physicians want proof that a new formulation isn't just convenient, but that it's superior to existing available medicines. As David Steinberg, an analyst with Deutsche Bank, told START UP in December: "The old model of drug delivery is completely broken down. To be successful you have to think far more innovatively."

Thing is, it takes a lot of money--and risk--to engineer a delivery system robust enough to deliver a real therapeutic advantage. Look at the field's lone success story in recent years--XenoPort. The company's share price has increased more than six-fold since its 2005 IPO, thanks to the success of its gabapentin pro-drug, XP13512, for restless leg syndrome and neuropathic pain. Last February GlaxoSmithKline agreed to fork over $75 million in cash and another $500 million in development, regulatory, and sales milestones for the compound. (Just for the record, Xenoport raised approximately $270 million in equity capital and another $160 million from partners to get enough data to convince the pharma of XP13512's value.)

So, the big lesson from XenoPort's success? Delivery technology ain't enough. XenoPort was only able to sign this monster deal with GSK because XP13512 is a new chemical entity with hard-to-duplicate molecular advantages. (The nifty formulation technology is an added bonus to investors -- a key part of its discovery platform.)

Of course, there is a corollary to this lesson (This IS a Windhover publication.) To be successful in drug delivery today means spending research dollars on two fronts: not only do you have to spend money to engineer the delivery system, but you also have to spend money to discover and develop novel, first-in-class or best-in-class compounds. Which leads this IN VIVO blogger to wonder, why even bother with the delivery piece of the puzzle?

Seem's like Nektar's board and CEO, Howard Robin, have been asking the same question. As part of the company's restructuring, Robin noted in a press release that "We are transforming Nektar into a world-class drug development company."

My friends and colleagues know I'm a big believer in the "I think I can" strategy. But it's tough to see how Nektar's transformation will occur near term. True, the company's inhaled amikacin, which is being co-developed with Bayer AG, is expected to enter Phase III clinical trials later this year, and its two leading PEGylated small molecule programs, PEG-irinotecan and oral PEG-naloxol, just entered Phase II clinical trials. But will there be the leadership to push these two products through development now that Nektar's PEG champion and resident brainiac, Hoyoung Huh, is jumping ship to take the helm of BiPar Sciences?

Maybe "the decision to step down as COO was a difficult one," as Huh asserts in another press release issued today. After all, he hasn't severed ties with the company completely. He'll be serving on the company's Board of Directors until 2009 or until a replacement has been identified according to SEC documents. Or maybe, Huh, whose CV lists an MD, a PhD, and a stint as a McKinsey partner, saw the darkening skies and approaching stormy seas and left for the relatively calmer waters of private biotech.

February 27 should be an interesting day. That's when Nektar will release results for the fourth quarter and full year of 2007. Meantime, Nektar employees, remember: deep breath in; deep breath out.

Photo courtesy of Flickr user Transguyjay through a creative commons license.

Novo Scraps Inhaled Insulin

The dismal failure of Pfizer/Nektar’s Exubera loudly called into question whether inhaled mealtime insulin was commercially viable at all.

The answer—surprise, surprise--is that it’s not, at least according to Novo Nordisk. The Danish firm announced last night that it was scrapping its Phase III inhaled insulin program, which uses Aradigm’s AERx liquid aerosol system.

The slight irony here is that the (already painfully delayed) AERx program was killed because it failed to show “sufficient clinical or convenience benefits” over the various insulin analogs already available to patients—including, prominently, those using Novo’s own FlexPen, a discreet and simple-to-use injection device.

Novo’s decision doesn’t mean that other late-stage inhaled insulin wannabes, including Lilly/Alkermes and MannKind will follow suit. But as we argued in this IN VIVO feature, Pfizer’s snafu means the going will be tough. Novo was at best going to be third to market, and the brick-sized device (far larger than Lilly/Alkermes’) had long been recognized as a problem—that’s why Novo had begun a next-generation program in-house. And the product required refrigeration.

So the writing was on the wall. In fact it’s somewhat of a relief that Novo has finally put this long and expensive project to bed, taking a non-recurring cost of about $260 million (DKK 1.3 billion), which will hit 2007 operating profit. Mads Krogsgaard Thomsen, CSO and EVP of Novo Nordisk had already last year acknowledged that “this is not going to be a huge product.” Now it won’t be one at all.

Not that this spells the end of pulmonary delivery for Novo. The problem with all of the current batch of inhaled insulins, according to Thomsen, is that they’re short-acting, meal-time insulins that must be taken alongside basal insulin—the ones available with tiny, pain-free injection devices. Exubera's failure showed that patients (and payors) understandably, were reluctant to add onto that regime something even more complex. And Pfizer, for reasons we outline here, failed to reverse the treatment sequence by persuading physicians to prescribe insulin earlier on.

So given that meal-time insulin is typically a fifth or sixth step in diabetics’ chain of medication (which progresses from diet-and-exercise, through oral anti-diabetic drugs to GLP-1s and then basal insulin) why did drug companies focus their inhaled efforts on this and not basal insulin? “Becase we had no choice,” says Thomsen, technological limitations meant that prandial insulin was the only one which could be formulated for inhalation.

Those limitations are no longer, he continues. Novo now intends to focus on developing pulmonary forms of basal insulin and GLP-1. We outlined in a feature last summer the importance of glucagon-like-peptide (GLP-1) analogs (and Phase III GLP-1 analog liraglutide in particular) to Novo’s business, so it’s no surprise that GLP-1s feature in the firm’s fresh set of pulmonary delivery plans.

These are a way from the market, however—liraglutide itself can’t be formulated for inhaled delivery because its half-life is too short; nor can Lilly’s first-to-market Byetta. Still, “we’re not starting from scratch, either; we have an inhaled, bioavailable GLP-1 candidate in late-preclinical trials,” asserted Thomsen on a conference call following today’s news.

Novo’s shares were down nearly 4% this morning; chances are Aradigm might have a bad day when the US exchange opens. But Novo’s put on a brave face. “We’re going from being followers in a commercially unattractive area, inhaled meal-time insulin, to leaders in a highly commercially-attractive area—a new generation of inhaled long-acting basal insulins and GLP-1 analogs.”

Europe's Best-Kept Biotech Secret?

European investors pining for a biotech champion used to muse about the lack of a Genentech- or Amgen-equivalent on the Continent. (Despite Amgen's recent woes--of which you can read a detailed analysis in May's IN VIVO--a few probably still wish for one.)

But maybe some are overlooking what’s in their own back-yard. Shares in Denmark’s Novo-Nordisk have almost doubled in the last two years as the firm has quietly pushed to number one in the insulin market, beating big guys Eli Lilly and Sanofi-Aventis.

With sales of €5 billion ($10 billion) last year, and a market cap just short of $40 billion, Novo’s only half an Amgen. But its challenges aren’t half as big, either.

For one thing, Novo doesn't face a Mircera-equivalent competitive challenge to its insulin portfolio. Nor does it face safety issues--in part since insulin isn't widely used in indications outside diabetes. Insulin's also less expensive than many other protein drugs, so, although on payors' hit lists for bio-genericization, it faces not quite the same reimbursement risk as EPO. (That's probably why insulin is almost completely absent from European biosimilar firms' pipelines.)

Although patents on basic recombinant insulin are long gone (while Amgen still holds on to EPO and sons), engineered analogs have a while to run. And anyway, new entrants still struggle, it seems, even Pfizer-sized ones.

More importantly, the glucose-control pathway offers a related protein, GLP-1, for Novo to take mastery of. Glucagon-like peptide is a hormone that enhances insulin secretion in a glucose-dependent way. Shame for Novo that Lilly and Amylin are already there, selling first-in-class Byetta and doing fine, thank you.

Still, Novo's CSO Mads Thomsen told the IN VIVO Blog they can do better with likely second-to-market GLP-1 analog liraglutide; in terms of administration, dosing and side-effects. Meantime Novo is hedging its bets in the growth hormone space, in hemostasis management, and with newer efforts in inflammation and cancer.

But unlike Amgen, whose pipeline betrays a future with many more small molecules, and in many more therapeutic areas, Novo is sticking to its core capabilities—protein engineering. That’s why it yanked its oral anti-diabetic efforts in January (too competitive, too genericized, and what can follow Merck's Januvia anyway?).

Novo needs liraglutide to work as well as says it does. But if liraglutide does come good--we could know early in the second half of this year when the first batch of Phase III data is due--Novo may yet be likened to Europe’s Amgen. Albeit, perhaps, the Amgen of last year, not this year.

More Insulin Problems

Pfizer isn't the only company having problems with an alternative delivery form of insulin.

Emisphere Technologies has been working on oral insulin for more than a decade--and finally its board got fed up.

In October 2006, the company reported disappointing Phase II results with its oral insulin--no difference from placebo. The stock tumbled by more than 50%. By January the long-time CEO, Michael Goldberg, MD, was out. The firing was led by Mark Rachesky, who joined Emisphere's board in 2005 when his fund, MHR Institutional Partners, loaned the company $15 million, later changing the straight debt to a convert--at $3.78 a share. That's unprofitably close to the company's current stock price (and less than half the Emisphere price when Rachesky did the covert deal).

Goldberg was blamed for poor execution of the key trial (as well as the fact that the company hasn't made much progress in its nearly nineteen years of life). The original trial design called for the oral insulin to be tested in very sick but stable patients; to accelerate the enrollment, the company apparently relaxed the criteria. In a subsegment look at patients who met the original criteria--an often unreliable analysis--oral insulin apparently did perform well. But now the company needs a new trial to prove the point. And this isn't the first trial that wasn't well executed: its oral heparin test was hurt by a poor liquid formulation whose taste turned off patients.

The company is by no means dead--it's managed to hire a new CEO, Michael Novinski, the former president of Organon USA. And it's brought on a board of big-name diabetologists to advise it on trial design and execution. It's got a new formulation with apparently three times the absorption of the older version--thus reducing cost-of-goods and increasing patient convenience.

But oral insulin won't win on convenience. And it won't win by eliminating the pain of injections. New smaller needles make taking insulin relatively painless. The big advantage will be eliminating embarassment, says one insider: "What diabetics hate is at a restaurant having to pull up their shirt and stick themselves in the stomach with a needle." Exubera doesn't solve that problem: puffing on a big device is no less inconspicuous than sticking one's belly with a needle.

A pill should be a lot more acceptable. And yet that's not enough. The market for insulin reformulations is being shaved by better needle technology and by new products, like the injectable Byetta and the oral Januvia. And as Pfizer is learning from Exubera, managed care doesn't want to pay for convenience. Emisphere's product, to be truly important, will have to show better outcomes. It may be able to get on the market by showing equivalency to injectable insulin--but to make Emisphere, and oral insulin, a success, it will need to keep diabetics healthier, too. That's a much more expensive task than most proponents of oral protein delivery ever figured they'd have to accomplish.