Live From ASCO: Time To Cool Down?

It's day three of ASCO and the meeting is at a fever pitch, as the National Cancer Institute's Antonio Tito Fojo wryly observed during a panel on designing randomized controlled trials to achieve meaningful benefits. Not that it's an unusual state for the world's largest meeting on the largest field of drug development.

There is the typical fervor surrounding promising early data, a few major advances to report (for instance, the melanoma data from Roche and BMS covered by among others, the NYT, WSJ, Reuters, and, of course, "The Pink Sheet" Daily), and the meeting halls are packed with clinicians, investors, and journos. (Saturday's clinical science symposium on ovarian cancer had such throngs waiting for it to start that McCormick Place called in bouncers, from "Armageddon Security," nonetheless. And if you weren't in the initial crush, you probably got diverted to an overflow room. Or the second overflow room.)

Still, compared to other years, analysts aren't finding much to write home about. And, increasingly, the importance of the data being presented before packed meeting halls is being questioned. "We need to get away from things that add cost but not value," UnitedHealthcare's Lee Newcomer noted during a panel on health care reform.

Defining what value means, however, is a trickier subject.

Most clinical trials don't mean much for clinical practice, Ralph Meyer of Queen's University asserted at the plenary on randomized clinical trials. With all the controls and standardization, they represent the ideal – not real world practice. And registration studies are intended for that purpose.

In a talk called "Raising the Bar for Efficacy In Cancer Therapeutics," Alberto Sobrero, Head of the Medical Oncology Unit at Italy's Ospedale San Martino, took on whether or not those trials produce clinically meaningful data, or just go after statistical significance. Looking at the 15 pivotal Phase III trials for 9 biologics covering 8 different cancers approved over a 5-year period, he found that the hazard ratios (a statistical metric for calculating risk reduction) for progression-free survival and overall survival looked good at (respectively) 0.57 and 0.73. But when you considered the absolute gains of 2.7 and 2 months, the data were far less clear. Or as Sobrero put it, "Hmmm."

It's a complicated situation, he acknowledged. In an aggressive cancer like metastatic melanoma, a 0.8 HR would mean a 1.5 month gain – not really meaningful. But in breast cancer, that same 0.8 HR becomes worthwhile with a 6 month gain. So, both hazard ratios and absolute gain need to be considered --as well as the context of the specific tumor type-- when making a value judgement about a clinical benefit.

NCI's Fojo also questioned the significance of statistical significance. Paraphrasing an earlier researcher, he noted that if you torture data long enough, you can get it to confess to significance. Fojo found much of the clinical benefit shown in studies has marginal value. By definition, clinical benefit rate (CBR) is what you get when you add stable disease to partial and complete responses. Or, as Fojo put it, it's what you report when you have a drug that underperforms. It's "the corruption of an endpoint," he said.

Shrinking a tumor is good, he agreed, but unless it correlates with survival, stable disease does not mean anything. In prostate cancer, for instance, where some novel drugs have been reporting CBR, objective response rate (PR+CR) correlates highly with overall survival. But when you include patients that met stable disease criteria, the average benefit drops by more than half. "Because you're adding a parameter that has no value at all," Fojo said.

Of course, part of the concern is that these absolute gains aren't coming without costs. It's one thing for a drug to provide 2 months of life, quite another if it costs thousands of dollars and comes with toxicities. And given the proliferation of oncology drugs, there's more room for payers to actively manage the disease, benchmarking more expensive newer agents against cheaper, older ones, and using the ultimate metric --survival -- as the measuring stick. That's playing out at ASCO too, as Newcomer's comments indicate.

Unlike in the past, the skepticism of therapeutic value outlined in posters and abstracts isn't limited to the back corridors or the marginal sessions on clinical trial design and practice issues -- it's coming from the podium at scientific sessions. For instance, a review of recent Phase III trials in upper GI malignancies was organized around the theme of whether the findings were clinically meaningful or just statistically significant, and included a talk about the health care economics of treatment. (Hint: It wasn't pretty.)

It's all part of a larger trend toward more concentration on value, cost and payer issues as IN VIVO covered recently in the May 2011 issue.

It's great to see researchers and industry execs coming out of the convention with excitement about promising new pathways and the potential for combinations. But they should also start thinking harder about raising the bar. Otherwise climate change (of a reimbursement and/or regulatory nature) could spark a cool down in one of the hottest therapeutic areas of the industry.

Image courtesy of flickrer Joe Seggiola through a creative commons license.

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

Deals Of The Week: The Sushi Edition

The biggest deal of the week, Daiichi’s purchase of the California biotech Plexxikon for $805 million upfront, prompted headlines elsewhere about the rise of Japanese dealmakers. Faithful readers of IN VIVO Blog won't be surprised by such pronouncements. It’s a trend that has been gathering steam since Eisai’s take-out of MGI Pharma and Takeda’s land-grab of Millennium Pharmaceuticals. (And yes, that's about 3.5 years longer than Kyowa Hakko's bid for ProStrakan.)

Indeed, as we wrote in a May 2010 IN VIVO feature, Japanese pharmas are now serious contenders for partnerships outside their home country as domestic factors –including consolidation in the home market, slowing growth, and a strong yen – have become powerful forces of change.

And as the Plexxikon deal shows (see below) that’s very good news for biotechs of a certain profile –especially neurology and oncology players close to commercialization. Given the merger mania of the past several years, the pool of potential acquirers for biotech assets has diminished, meaning any new buyers willing to pay top dollar are welcome news. In addition, Japanese players like Takeda( or Astellas or Daiichi) seem amenable to terms that allow the smaller party a great deal of autonomy, whether it’s running a biotech as a stand-alone within the parent pharma or establishing co-promotion/co-development options as part of an alliance.

The continued activity of players like Daiichi means biotech execs should brush up on their Japanese and learn to love sushi. (What’s not to love about sushi?) As always, domo arigato for reading…

Daiichi Sankyo/Plexxikon: Kaaa-ching! Bidding by multiple companies and strong data for a late-stage, targeted melanoma drug helped drive Daiichi Sankyo’s eye-popping acquisition of privately-held Plexxikon this week. The deal is one of the priciest acquisitions of a private biotech since 2006, according to Elsevier's Strategic Transactions and in-line with J&J's take-out of abiraterone developer Cougar Biotechnology. Equally notable is Daiichi's down-payment. At a time when bigger and smaller pharmaceutical players are trying to hedge their risk by structuring earn-out heavy deals, the Japanese pharma is shelling out $805 million, a deposit that approximates 86% of the deal's potential value. Even without the additional milestones, this sum provides an impressive return for the nine venture capital firms who have staked 10-year-old Plexxikon, which has made a name for itself with its targeted melanoma drug PLX4032. But the deal's price tag is only a piece of the story; the advent of a dark horse buyer is another important consideration. Back in 2006, Plexxikon partnered the drug to Roche for $40 million upfront, retaining an option to co-promote the product in the U.S. market. In early January 2011, Plexxikon exercised this option, agreeing to reimburse Genentech, which is responsible for ongoing development of the medicine, for certain marketing and promotion costs. With the planned acquisition, this option - and the resulting enhanced royalties on product sales owed to Plexxikon - now transfers to Daiichi. That the Japanese pharma would spend so much to obtain only a piece of a potentially lucrative molecule illustrates both the scarcity of late-stage oncology assets and just how much Big Pharmas are willing to pay to get drugs with validated mechanisms of action in this competitive therapeutic area. (For more, see our 2006 feature "The $100 Million IND.") It also brings Daiichi in line with the other big three Japanese pharmas - Astellas, Takeda Pharmaceutical and Eisai - all of whom have used acquisition to bolster their U.S. oncology offerings. --EFL

Takeda/Intra-Cellular Therapies: Daiichi wasn’t the only Japanese pharma wheeling and dealing this week. Takeda also announced its decision to license Intra-Cellular Therapies’ preclinical, orally available phosphodiesterase type 1 (PDE1) inhibitors for treatment of the cognitive impairment associated with schizophrenia in what appears to be a heavily back-end loaded deal. Disclosed terms were pretty vanilla: Takeda makes an undisclosed upfront in exchange for exclusive worldwide rights, and will pay development milestones of up to $500 million, with another $250 million owed if the product(s) hit certain sales objectives. Takeda will be solely responsible for the development, manufacturing, and commercialization of the compounds. In addition to schizophrenia, Takeda also has rights to develop the inhibitors for other neurological indications, potentially including dementia, Parkinson’s disease, and Alzheimer’s disease. Privately-held ITI is built around scientific findings discovered in the lab of Rockefeller University’s Paul Greengard; in 2005 it also inlicensed a basket of preclinical compounds from Bristol-Myers Squibb. According to sister publication “The Pink Sheet” Daily, ITI hadn’t planned on partnering its PDE1 program quite so soon, but pharma’s level of interest in the compounds, which are very selective for the PDE1 subfamily and thus, presumably, won’t cause off target side-effects, was so high the company changed its mind. Neither company would discuss timelines or details on the clinical development program, but ITI's CEO Sharon Mates did say there were clearly defined endpoints for positive symptoms associated with schizophrenia, as well as standard cognition measurements. –EFL

Merck/Lycera: Privately held, autoimmune-focused Lycera signed a collaboration with Merck March 3 under which the two companies will discover, develop and commercialize small molecule candidates that orchestrate the differentiation of T-helper 17 cells. Diseases targeted by the partnership may include rheumatoid arthritis, psoriasis, inflammatory bowel disease and multiple sclerosis. The deal calls for Merck to pay Michigan-based Lycera a $12 million upfront payment, undisclosed research funding, as well as research, development and regulatory milestones of up to $295 million. (There are also potential low-double-digit tiered royalties on any products that reach the market.) The companies will collaborate on discovery and preclinical work, with Merck responsible for clinical development of any resulting candidates. The pharma also will hold worldwide marketing and commercialization rights to such candidates. Lycera, profiled in this 2009 Start-Up article, is backed by InterWest Partners, ARCH Venture Partners, Clarus Ventures and EDF Ventures. It brought in $11 million last April in the second tranche of a Series A financing announced in April 2009.—Joseph Haas

GlaxoSmithKline/Targacept: In a “No-Deal” that was not unexpected, GlaxoSmithKline, which announced plans to exit the central nervous system arena a year ago, terminated its partnership with Targacept March 3 to co-develop neuronal nicotinic receptor modulators in five therapeutic areas – pain, smoking cessation, addiction, obesity and Parkinson’s disease. GSK paid $35 million upfront to initiate the partnership in 2007, including a $15 million equity investment in the North Carolina biotech. Its resulting exit leaves Targacept in full control of all programs subject to the alliance, each of which is still in preclinical stages. Targacept, which still has a potential $1.2 billion, multi-program collaboration in place with AstraZeneca, said it made $45 million over the life of its deal with GSK. In a March 4 note, analyst Robyn Karnauskas of Deutsche Bank said AstraZeneca is Targacept’s key partner, as the companies await Phase III data for TC-5214 in adjuvant treatment of refractory depression in the fourth quarter of this year. Targacept, which had about $252 million in cash on hand at the end of 2010, also is awaiting AstraZeneca’s decision on whether it will opt in on the Phase II schizophrenia and ADHD candidate TC-5619 – top-line data in ADHD are expected by the end of this quarter, with AstraZeneca expected to makes its call by mid-year.--JAH

Ipsen/GTx: GTx can’t seem to catch a break. When its Ostarine-focused alliance with Merck blew up last year, GTx at least had the committed support of Ipsen. The two have been partners since 2006 when they aligned to develop the biotech’s selective estrogen receptor modulator (SERM) toremifene to treat the side-effects of androgen deprivation therapy in prostate cancer patients. And Ipsen remained true even though toremifene’s clinical development path has been strewn with obstacles, including a 2009 complete response letter requiring an additional Phase III clinical trial. That’s not to say the alliance didn’t change; after the CRL, the two parties revised their 2006 deal, releasing Ipsen from milestone payments in exchange for in bankrolling up to $58 million to support the additional clinical trial. This week comes news that Ipsen is calling it quits on toremifene after all. Apparently the projected costs associated with the needed clinical trial exceed the $58 million sum the two brokered in 2010. “We spent significant time analyzing the business case for toremifene 80 mg and have concluded that the most appropriate course is to terminate our collaboration,” GTx’s CEO Mitchell Steiner said in a statement. Ouch. Investors hammered GTx’s stock, which slid 9% on the news to $2.35. The troubles with toremifene could mean some hard choices for GTx, which ended 2010 with $58.6 million in cash and cash equivalents. The company will likely need to find another partner for at least one of its Phase III programs, whether it is toremifene or Ostarine, currently in development for the treatment of muscle wasting in patients with non-small cell lung cancer. --EFL

Image courtesy of flickrer lotusutol, used with permission through a creative commons license.

Deals Of The Week Goes To The Oscars

It's that time of year. The science of bracketology has yet to enliven talk around the water cooler, the official start to the 2011 baseball season is still a month away (no, spring training doesn't count), and all the backchecks, forechecks, and stick-checks are about as meaningless as the top shelf or the five hole. (Yes, this blogger admits she's a philistine.)

Which leaves us with Oscar drama. The Black Swan or The King's Speech? Sorry, not The Social Network. An Oscar nod to a film about a 26-year-old and a company that stands to raise a gazillion dollar IPO is a little like giving a 40-something president in his first term the Nobel Peace Prize. (Oh, wait a minute.)

Far from Hollywood's glitterati, there's been plenty of drama in the biotech industry this week and a couple of Oscar- (er, Roger?) worthy performances. Roche's Genentech continues to challenge FDA, trying to position itself as David against a regulatory Goliath in the ongoing brouhaha surrounding Avastin's use in breast cancer and the FDA Oncology Drugs Advisory Committee's decision to rescind accelerated approval.

On Feb. 24 Genentech said a hearing to review the decision will go forward, but within ODAC itself. That's not what the drugmaker wanted; it was pressing for "an objective advisory committee with substantial breast cancer expertise," arguing that the recent ODAC session was underpowered in this indication. But FDA will use its ODAC to make the decision, with Commissioner Margaret Hamburg's designee Karen Midthun arguing the rules don't allow FDA to substitute a different advisory committee. (Recall Avastin use in this indication was shot down 12-1 in the December meeting.)

Moreover, FDA won't be adding additional consultants to the current ODAC panel, arguing that the controversial nature of Avastin's breast cancer approval makes it difficult to find additional unbiased panelists. "We must face the reality that many experts in this area have already expressed a view on this issue and/or might be considered as having conflicts of interest because of their association with one of the parties to the hearing or competitors to Genentech," said Midthun.

To add to the excitement, the biopharma community won't just be watching, it will actually be in town when the ODAC convenes. The meeting coincides with BIO's national wheeling and dealing event in DC in late June. No word on whether FDA will roll out a red carpet in advance of the event, but we're guessing it's not in the regulatory body's budget.

Other biopharma events worth a call-out this week? For best stoic performance, the leading candidate has to be David Bredt, Eli Lilly's beleaguered head of neuroscience, who unexpectedly resigned this week. And for best comedy of errors, in a sequel to the Bad News Bears, Johnson & Johnson is clearly the leading nominee. The big pharma continues to hamstring its own R&D advances with manufacturing slip-ups. This week came news of problems with its Simponi injector and a recall of more than 660,000 Sudafed packages due to a 'not'-ty typo in the label that reminds consumers the following: "do not not divide, crush, chew, or dissolve the tablet." That's got to be a nomination for worst proofreading in a major consumer product label, not to mention an affrontery to the King's English.

We don't have the envelope yet, but odds are the winner for most insightful deal analysis is going to be...


Gilead Sciences/Calistoga: For the DOTW Oscar for best performance in a competitive space, with a nod to a separate category -- risk-sharing -- look no further than this week's tie-up between Gilead and privately-held Calistoga. Gilead announced February 25 it would pay $375 million in upfront cash, plus another $225 million in potential milestones, to take out Calistoga, one of the most closely watched entities in the PI3K inhibitor space. The on-the-table dollars represent a 4.6x increase over the $81 million the four-year-old start-up has raised from its venture investors, which include Frazier Healthcare, Alta Partners, and Three Arch. It's also one of the richest deals yet in the PI3K space, an arena big pharmas are eager to enter because the signaling pathway involved is implicated not only in oncology, but also inflammatory disease, cardiovascular disorders, and neuro-degenerative conditions. The acquisition gives Gilead a Phase II asset and a basket of interesting, highly specific but early-stage PI3K blockers. It also deepens the big biotech's commitment to oncology, building on its 2010 acquisition of CGI Pharmaceuticals and that firm's kinase discovery engine. Gilead's decision to make Calistoga its base of oncology expertise via the creation of a stand-alone Seattle division is probably smart but could be tricky to execute. Recall Gilead's commercial strength remains squarely in the anti-infective space and the strategy to acquire oncology capabilities is one other biotechs have tried and failed to replicate in the past. Biogen (via the Idec merger), for example, never grew into the dominant oncology player it planned to be and has since jettisoned that half of its business, betting that focus not diversification will be the greatest path to shareholder value. The onus on Gilead is to ensure the Calistoga team, especially its R&D and early clinical development execs, stay on board; the earn-out structure may help in that regard. -- EFL

TiGenix/Cellerix: Belgium-based regenerative medicine player TiGenix and Spanish cell therapy firm Cellerix propose to combine forces via a share exchange to create “a new European leader in cell therapy." The enlarged company will have two marketed products in Europe (including the first ever cell-therapy product to be approved by the European Medicines Agency, TiGenix’s ChondroCelect), two stem cell platforms (TiGenix’s allogeneic one, and Cellerix’s autologous one), and at least €33 million in cash that will last two years minimum. Indeed, both sides have concurrently secured additional financing from their shareholders, signaling investors’ general support for the deal. TiGenix has secured €10 million of a planned public rights offering, while Cellerix’s investors have committed the final €18 million of a €28 million round that began in late 2009. The hope is the newly enlarged group will provide investors a better shot at getting a return. Since its inception Cellerix has raised about €60 million as one of Spain’s first biotechs, and this deal values the Barcelona-based group at about the same. In the short term, the combined group may be better placed to lock in an interested big pharma partner. Importantly, Cellerix’s platform, based on expanded adult stem cells extracted from adipose tissue, creates off-the-shelf products that are less complex and expensive to create and administer than TiGenix’s ChondroCelect, which requires harvesting a patient’s own cells. Signs that big pharma is no longer running away from cell therapies? Think Cephalon’s December 2010 deal with Australia’s Mesoblast, GlaxoSmithKline’s toe-dipping with Harvard Stem Cell Institute, and Sanofi-Aventis’ tie-up with the Salk Institute. -- Melanie Senior

Forest Labs/Clinical Data: Much of the buzz around this week’s merger agreement between Forest and Clinical Data was around valuation. Forest is paying $30 per share, or $1.2 billion, plus up to $6 per share in contingent milestones to get ClinData’s antidepressant vilazodone, which was approved in January in the US for major depressive disorder. The price was less than ClinData’s prior Friday closing price of $33.90 and only a 6.6% premium over the volume-weighted average trading price since the vilazodone approval. But there’s considerable risk attached to vilazodone; hence the contingent payout to shareholders, which begins to kick in at $1 per share if trailing four-quarter sales exceed $800 million within five years. The drug label looks “clinically undifferentiated to us,” Leerink Swann noted, adding that the lack of an active comparator in trials “makes it difficult to tease out any meaningful benefits.” That said, it also believes Forest can get solid formulary coverage for the drug based on its track record with payors with its existing medicines -- Celexa and Lexapro -- and the strength of the new brand in a category that’s become genericized. (Lexapro, for example, goes generic next year. ) Vilazodone’s development is a true success story for ClinData, which got the drug via its 2005 acquisition of Genaissance Pharmaceuticals for $55 million, and ultimately for the Genaissance team, which had licensed vilazodone from Merck KGAA in one of its early pharmacogenetics programs. But like Vanda and its schizophrenia drug iloperidone, ClinData did not fully execute on the original premise for the development of vilazodone: i.e. its initial evaluation using pharmacogenetics would lead to a drug approval in parallel with a biomarker that would direct the drug to an enriched patient population for which it would show a more favorable risk/benefit profile. Indeed, for psychiatric drugs, that kind of targeting still seems a long way off. -- Mark Ratner

Kyowa Hakko/ProStrakan Group: Best foreign drama has to be the evolving Prostrakan/Kyowa Hakko tie-up. Three months after putting itself up for sale, U.K.-based specialty pharma ProStrakan might be teaming up with Japan's Kyowa Hakko Kirin. The 130 pence-per-share deal, announced Feb. 21, values the company at about £292 million ($475 million). If finalized, ProStrakan would provide Kyowa a commercial presence and regulatory expertise in Europe and the U.S. that would be useful as it looks to commercialize its pipeline assets outside of Japan. The two companies are already familiar biz cronies: Kyowa is a licensee for two of ProStrakan's products in Japan and other Asian countries. The price represents a 41% premium to ProStrakan's share price one day before its offer period began in November 2010, and it's supported by more than 47% of the specialty pharma's shareholders. But most analysts believe it undervalues the U.K. group. ProStrakan suffered a series of regulatory and manufacturing setbacks in 2010, sending its shares to an all-time low of barely 40 pence in September. That led to an unsolicited offer from privately held pan-European Norgine (which, when rejected, went on to buy a 12.6% shareholding), and, subsequently, ProStrakan's decision to put itself up for sale. The logic behind the move: fix ProStrakan's internal commercial and regulatory issues and then secure a reasonable sale price. The first has happened, but the second hasn't, according to some. "A fair price would have been 160 pence per share," Nomura Code analyst Samir Devani told sister publication "The Pink Sheet" DAILY. The current deal values ProStrakan at about 2.7 times revenues, less than the 3.5 times revenues paid by Meda for U.S.-based specialty pharma Alavan Pharmaceuticals in August 2010, and well below the (admittedly punchy) 4.5 times revenues paid by Biovitrum for orphan-diseases focused, pan-European player Swedish Orphan in November 2009. -- Melanie Senior

Roche/Transgene: And finally, the DOTW Oscar for best performance in the face of adversity goes to Transgene, which this week announced its big pharma partner Roche was pulling out of a collaboration to develop the smaller company's TG4001, a Phase 2b therapeutic vaccine for lesions caused by Human Papilloma Virus infection. The good news (also known as the spin): Roche's decision won't have a significant impact on Transgene's financial situation, at least in the short term. Also, the termination won't slow down the ongoing Phase IIb trial, which is structured to test the vaccine in over 200 patients. Transgene already has 195 patients enrolled in its mid-stage study, and anticipates interim data by the end of the year or early in 2012. In addition, Transgene "regains full and unencumbered development and commercialization rights to the product" according to the press release announcing the news. That means when the licensing deal officially concludes this summer, Transgene can look for another deep-pocketed partner to help prepare a registrational trial. Will another pharma bite? Specialty products and especially vaccines are all the rage these days, and Trangene emphasized in its press release that the "no deal" was the result of a strategic decision by Roche, and "is not data driven." The question is who might have greater strategic interest in HPV than the Swiss pharma, which via its diagnostic business is developing its cobas HPV test to individually detect HPV-16 and HPV-18, the two HPV genotypes causing 70% of cervical cancer cases. (Interestingly, the Swiss pharma published new positive data about the test this week in the American Journal Of Clinical Pathology.) -- EFL

How Close Avastin Really Came To Adjuvant Colorectal Cancer Use

Six events. Six additional cases of recurrence out of the 2,710 patients being treated in the C-08 trial of Roche/Genentech’s Avastin in adjuvant colorectal cancer, and there would have been an entirely different outcome.

Six more cases at the interim look and everyone would be using Avastin in adjuvant colorectal cancer patients. That’s how close the study was to meeting the early-stopping rule at one year, lead investigator Carmen Allegra said at Roche/Genentech’s on-site ASCO analyst event.

To be sure we hit this home hard enough: if just an additional six events had occurred at the one-year interim look, than the trial would have been stopped early. As the full analysis of data presented at ASCO made clear, at one year (not coincidentally, the time period that patients received bevacizumab), there was a significant benefit for the drug. A 40% advantage, to be precise. Lots of zeroes in the p-value to make the statisticians happy. More than enough benefit to drive utilization even before FDA approval.

Contrast that to the actual end of the study. At the pre-specified three-year endpoint, when there were 603 events, disease-free survival had dropped out of significance. The end result for Avastin was 77.4% versus 75.5% for chemo alone. But the eventual failure is old news, previewed in April and heard round the world.

The study investigators, and Roche/Genentech executives, were very keen on the one year results in unveiling the full dataset from C-08, stressing that the drug was extremely effective while being given and it was only after bevacizumab was stopped that the benefit diminished. Their take-away was that more study was needed with a longer duration of treatment with bevacizumab.

That’s not to say there wouldn’t have been valuable and appropriate questions raised about long-term tolerability and about the level of benefit versus alternatives and about the cost-effectiveness. However, it’s awfully close to taking what was ultimately a negative trial and finding it instead to be a runaway success based on an interim peek.

What the experience does show is exactly why long-term follow-up is important (both to see whether there’s a spike in hypertension, or hey, that benefit seems to disappear pretty quickly). It also underscores the value of designing a trial for a more clear-cut look at overall survival, which wouldn’t leave us with the potential variability from the disease-free surrogate. It’s also much harder to make a cost-effectiveness argument when you have data in hand to show that lives are saved.

For more on the implications of the C-08 data release, including the potential to establish Avastin as adjuvant therapy in other cancers (and possibly still colorectal), and the potential need for caution given tolerability and cost concerns, check out this week’s “The Pink Sheet” here and here.--Mary Jo Laffler

image from flickr user Shovelling Son used under a creative commons license

ASCO Postscript: In Oncology, Cost is in the Hot Seat

This past ASCO meeting may have held few surprises on clinical data, but it certainly brought cost pressures to the forefront of oncology. The message: cost now matters in oncology treatment, just as it does in the rest of the pharma industry.

Oncology is still one of the least managed areas of specialty pharma and still not a top priority for cutting at most commercial payers, according to a survey presented recently at a managed care conference by Debbie Stern, a VP at the consulting firm Rxperts. Those payers are more concerned about rheumatoid arthritis, human growth hormone deficiencies, psoriasis and respiratory syncytial virus.

But payers are looking at spending trends and oncology pipelines ... and they’re scared. Oncology’s growth outstrips biotech’s overall and the pharma industry’s by a wide margin – Sales to pharma customers (hospitals, doctors, pharmacies) are growing at 8.6% this year, compared to 2.8% for biotech and flat-to-slightly-down for pharma overall, according to IMS Health. Lots of expensive new oncology drugs keep patients alive longer (if only a few months longer) and offer them a better quality of life.

As a result, the knives are getting sharpened. It’s been a slow process, mostly to-date led by the federal government, which beginning in 2004 clamped down on the amount it reimburses doctors for administering drugs in their offices. Commercial plans are following hesitantly, but they’re getting tougher, both on doctors and patients.

The upshot: doctors are getting less money for providing services to patients and therefore not able to forgive bad debt or lower bills for low-income patients. As for consumers, payers are hitting them with higher cost sharing, even as drug prices rise overall.

So how are manufacturers responding? Chiefly, by making sure patients can get the high-priced drugs, even if reimbursement is unwieldy. To help the process, they’re expanding programs that help patients cover the cost of the most expensive treatments, and also providing advice and guidance for physicians beleaguered by ever-changing reimbursement policies. The latter’s important because oncologists pay up front for drugs they administer in their offices, and then get paid by insurers for the cost of the drugs and their services. Supporting doctors is also important as oncologists talk more about cost with patients, as discussed in this Pink Sheet story.

What about price cuts? Isn't that what patients and doctors really want? Not happening, at least in the US and at least so far. If companies are spending lots of money to expand their patient access programs – reliable stats don’t exist, but consultants say the trend is growing—why don’t they de-emphasize those programs and just cut prices?

Because no matter how much they cost, patient access programs are more attractive than simply lowering prices on many drugs because even if the price of a $100K drug was slashed in half, patients still couldn’t afford it, points out Richard Ford, director of reimbursement consulting at AccessMed, a division of US Oncology, which runs patient access programs for pharma manufacturers. In other words, pharma gets more revenues from charging $100K then helping patients cover their 20% out of pocket expenses, he explains.

As for payer angst—pharma is addressing payers’ concerns by expanding its managed markets groups, which call on payers and try to negotiate the tricky waters linking providers, payers, and manufacturers. Pharma’s also paying more attention to getting its drugs listed on compendia, which helps gain payer support, particularly for off-label uses.

In the US, at least, however, pharma has yet to offer the creative kinds of risk- and cost-sharing options that it is engaged in the UK, i.e. along the lines of Merck-Serono’s tough new deal with the UK’s National Institute of Clinical Excellence for its cancer treatment Erbitux (cetuximab). Granted, the Merck-Serono deal (written up here in The Pink Sheet DAILY) takes some getting used to, and the company’s back was against the wall – the reimbursement agency had already issued negative opinions twice on Erbitux.

The industry, however, doesn’t seem to be particularly proactive in taking some other, potentially less drastic, steps US payers say they want, according to the Rxperts survey: namely, higher-quality data on survival benefits and outcomes—and preferably including information on cost effectiveness.

If industry doesn’t step up with something along those lines, it should be prepared to hear more from payers.--Wendy Diller

image by flickrer josefsilver.com used under a creative commons license

Deals of the Year Nominee: Takeda/Millennium

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

Takeda's $8.8 billion bid for Millennium Pharmaceuticals--the largest deal in its storied two century history--deserves a nod as deal of the year for a number of reasons.

Along with Eisai's 2007 acquisition of MGI Pharma and Daiichi Sankyo's $4.6 billion buy-out of a controlling interest in Ranbaxy (another 2008 deal of the year), Takeda's purchase of Millennium shows the determination of Japanese pharmaceutical companies to morph into global players on the biopharmaceutical industry stage. Indeed, as a group, Japanese pharmas were one of the top acquirers of private biotech from 2003 through August 2008, according to a recent START-UP article.

And their penchant for ex-Japan acquisitions is likely to continue, fueled in large part by a demanding domestic market where yearly price cuts on drugs are mandated by the government, stagnating growth, and a slower regulatory approval process. Add in pipeline pressures, large war chests of cash, and the relative strength of the yen to other currencies (a condition that gives the Japanese the upper hand in bidding wars), and its not unreasonable to believe that in 2009 Japan pharma companies will continue to be some of the industry's most active--and important--dealmakers.

But the Takeda/Milllennium deal doesn't just illustrate the prowess of Japanese deal-making. The transaction underscores another major theme at work in the industry: Big Pharma's apparently insatiable appetite for oncology products.

Think about it. In the past six months, we've seen Pfizer restructure with an eye to a more flexible future--a move that included eliminating early stage R&D in Big Pharma standbys like cardiovascular and obesity, and a greater emphasis on oncology, through the creation of its oncology business unit. Then there was Eli Lilly's October surprise--the $6.5 billion purchase of ImClone, a move that gives the Indianaoplis-based drug maker partial ownership of Erbitux plus a pipeline of targeted, but primarily early stage oncology products.

Indeed, Lilly's rationale for the ImClone deal sounded a lot like the reasoning Takeda offered up for its own bid for Millennium back in April: a need to bulk up in biologics, particularly in an indication with high unmet medical need and a smoother regulatory approval path.

Certainly, from a deal-making perspective Takeda has become the new deep-pockets of the cancer world. In 2008 alone, it inked handsome—some might argue excessive--agreements with Amgen, Cell Genesys, Millennium, and Alnylam to boost its abilities in oncology.

In its two-part monster deal with Amgen in February, for instance, Takeda spent $300 million up-front to gain Japanese rights to 13 compounds, including Vectibix, a humanized antibody to treat metastatic colorectal cancer, and purchased world-wide rights to motesanib, Amgen's Phase III angiogenesis inhibitor for various cancers. As part of the deal, Takeda agreed to purchase Amgen KK, Amgen's Japanese subsidiary, for an undisclosed price, in a bid to bulk up its large molecule offerings.

In May, the company announced one of its biggest research tie-ups yet: a deal with Alnylam worth $150 million up front for a nonexclusive license to develop drugs against oncology and metabolic disease targets using that company's RNA interference technology (another deal of the year nominee.)

But as we wrote in this feature, the acquisition of Millennium, which gives Takeda a potentially important marketed product in Velcade plus 10 other molecules in early-stage clinical trials, has to be considered the most significant--and perhaps strategically transformative--deal in Takeda's history.

Takeda's president, Yasuchika Hasegawa apparently played a critical role in pushing the deal through the company, convincing fellow executives and board members of its wisdom via a plethora of data that included financial simulations and pipeline studies. Key selling points in Millennium's favor: it offered Takeda geographic and pipeline synergies, dramatically expanding the company's commercial capabilities in the US, as well as strengthening its oncology franchise. In addition, Millennium already had in place a very capable management team, including president and CEO Deborah Dunsire, MD, a seasoned pharmaceutical veteran.

"Our typical approach when doing an acquisition is to select a target company with a proven track record where we don't need to implement major restructuring after the purchase," said Hasegawa in an interview with IN VIVO following the deal's announcement. But analysts have roundly criticized the deal for its expense, the lack of revenue generating products it provides, as well as the near-term quarterly hit on earning growth it will necessitate. Back in May, Takeda predicted that integrating Millennium would reduce the pharma's profit by 55% this year alone. In a November update, the company revealed just how much the acquisition cost its bottom line: ¥137.7 billion, reflecting in part the adverse impact of the U.S. economic slowdown.

Even so, six months later, it looks to have been a smart move. Velcade's approval in June as a first-line therapy for multiple myeloma has dramatically increased sales of the drug. In early December came news that worldwide sales of the product eclipsed $1 billion for the first-time. Moreover, a spate of positive news at the annual American Society for Hematology meeting suggest that the drug will remain a cornerstone of myeloma treatment for years to come.

And the truth is, Takeda' emerging cancer franchise, with Velcade as its cornerstone, is the company's lone bright spot. Recall that Takeda's two biggest money-makers, Actos and Prevacid, will go generic in 2013, at which time analysts expect profits from those drugs will drop 35% and 26% respectively. But thanks to late-stage clinical failures and missed PDUFA dates there's little beyond Velcade to make up the revenue gap.

Put another way: without eggs such as Velcade--and to a lesser extent Amgen's Vectibix--Takeda's basket of products would be decidedly empty.

Earlier this year the company announced it was shelving TAK-475, a novel cholesterol lowering drug in Phase III clinical trials, and matuzumab, a humanized antibody targeting the EGFR receptor under development with partner Merck KGAA. In late summer came news that the Phase III GVAX prostate cancer vaccine developed by Cell Genesys (for which Takeda paid $50 million upfront in a deal announced March 2008) failed to show efficacy in two different clinical trials. On October 17, Takeda officially pulled the plug on GVAX.

And the bad news kept coming. As October slid into November, the Japanese pharma announced the FDA has missed PDUFA dates for both its Prevacid follow-on TAK-390MR and its DPP-IV inhibitor, alogliptin. Both drugs fall squarely into the category of primary care drugs with high bars for regulatory approval.

TAK-390MR treats gastro-esophageal reflux disease, a non life-threatening condition well-treated by generic meds such as Zantac and Prilosec (and soon to be generic Prevacid). If regulators have any concerns about potential safety signals--Takeda attributes the delay to a backlog at FDA not something more sinister--they may be taking their time to evaluate the drug's application.

In the case of alogliptin, the drug's approval may be delayed due to shifting guidelines on diabetes meds. On Dec. 18, the agency put more stringent guidelines related to cardiovascular safety criteria into place for diabetes medicines. The new guidelines appy to all drugs in development or currently under agency review.

But to date, Takeda's oncology franchise is holding its own. Three out of six products in development registered advances. In addition to the dramatic uptick in Velcade sales, Takeda's TAP-144-SR for prostate cancer won marketing approval in Austria and Germany this year; and the colon cancer drug Vectibix recently completed Phase III trials and is pending approval in Japan.

No wonder its oncology all the time at Takeda these days.

beautiful basket of chicken eggs courtesy of flickr user woodleywonderworks through a creative commons license.

Ixempra Is Not Enough? BMS Buys Kosan

In an era where single Phase III projects are commanding up-front payments in the hundreds of millions of dollars--and even preclinical projects can boast the occasional triple-digit upfront payment--it might seem odd that Bristol-Myers Squibb only had to put up $190 million to acquire Kosan Biosciences.

After all, Kosan not only has tanespimycin, a Phase III cancer drug in a hot therapeutic class--Hsp90 inhibition--but it also has several other programs, including two in the clinic: a Pfizer-partnered motilide project in Phase I for GI disorders and an unpartnered Phase II program based on epothilones, molecules that could potentially be used to treat the same cancers as taxanes like Taxol.

Still, the Bristol offer, at $5.50 per share, represents about a 230% premium over the company's beaten down share price before the deal ($1.65). The market--and, probably Bristol as well--attached very little value to Kosan's unpartnered projects beyond the epothilones.

Bristol, after all, has pioneered the class of drugs with its first-in-class Ixempra, which was approved as both mono- and combination-therapy after a six-month priority review in October 2007. Landing KOS-584 and two other candidates, one in the clinic and one ready for an IND filing, helps solidify its leadership position in the epothilone field.

That the deal isn't centered more around tanespimycin probably says more about the difficulties Kosan has faced with this particular molecule than it does about the value of Hsp 90 inhibitors generally. Remember Hsp90, as a target class, has been the driver of multiple buyouts and licensing deals in the past couple years. Among them: Pfizer's acquisition of Serenex and Infinity's co-dev deal with MedImmune.

Instead it probably has more to do with the fact that tanespimycin is one of several Hsp90 inhibitors in development that are derived from geldanamycin, a natural compound relatively high in molecular weight that might have trouble reaching an important hotbed of Hsp90 activity, the interior of the mitochondria (a phenomenon we wrote about here).

We concede that this is a debatable point. Kosan's Helen Kim (then a recently appointed president and CBO brought onboard in January '08 to focus the firm on a few key assets and since promoted to CEO) told us in early March of this year that it remained unclear whether there would be a clear-cut difference in efficacy between geldanamycin-derived compounds and synthetic compounds inhibiting Hsp90. (Our feature on the Hsp90 space can be found here.)

Still at that time the market was ascribing zero value to any of Kosan's programs: it was trading around the same value as its cash on hand. In the end whether you believe Kosan was fairly or unfairly valued by BMS will depend on what you think of tanespimycin's chances.

Meanwhile, Kosan's epothilones are clearly commanding more interest. These molecules target a tumor cell's skeletal infrastructure, much like taxanes, but via a different mechanism, and molecules like Ixempra have been specifically designed to overcome drug resistance. As we noted in this December 2007 piece about Bristol's oncology business, Cornelius and co. are counting on Ixempra as a key part of its strategy to regain leadership in the cancer arena.

Kosan's epothilone programs--which also have potential in neurodegenerative disease--were also the subject of an insurance policy in the event the acquisition doesn't close. If the deal falls through BMS will license Kosan's epothilone programs and IP for $25 million upfront plus milestones and royalties.

Oddly enough that $25 million was the same up-front paid by Roche when it licensed Kosan's same programs back in 2002 (that deal dissolved in October 2007 after Ixempra's approval).

We wonder what Kosan was worth then.

Amgen Cashes out of Japan; Follows Bristol's Risk Sharing Example

It’s a sign of the times when Amgen starts licensing its drugs to mid-sized Japanese pharma.

Sure, we knew that troubled Amgen, hit by declining sales of EPO drugs and growing competition--including from forthcoming biogenerics--was looking for ways to cut costs. It had already last year declared workforce culls and its intention to partner certain R&D assets.

But this double-deal with Takeda, announced this morning, is still worth a second look. In Part I, Takeda gets Japanese rights to 12 of Amgen’s pipeline assets in exchange for $200 million up front, up to $340 million in development costs—not just for Japanese, but for worldwide development—plus up to $362 million in sales-linked milestones, and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum.

That regional deal’s interesting enough: Amgen, while touting its wider international expansion outside of the US, is exiting Japan. It wouldn't be the first; other companies have acknowledged that this tough market is best tackled by locals, who’ll pay dearly for access to assets. Amgen's move is also about cutting infrastructure—a trend, and need, that we’ve talked about in the context of Big Pharma’s unwieldy bureaucratic machines (and Amgen, too, is increasingly compared to Big Pharma, as we noted in this IN VIVO feature.)

Part II is the most telling bit of this deal, though. For another $100 million upfront and $175 million in additional success-based milestones, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer. It'll pay double-digit royalties on Japan sales, but will also cover 60% of ongoing development expenses outside of Japan, and share profits on a 50-50 basis.

This, in case you hadn't noticed, is Amgen doing risk- and cost-sharing, big time—like Bristol Myers Squibb did via monster deals in early 2007 with AstraZeneca and with Pfizer. Amgen's not only got itself a partner in a market that's now clearly non-core, but has also secured a good chunk of its ex-Japan costs, too, on all 13 molecules.

Amgen didn’t used to do out-licensing, at least, not until a lonely deal with InteKrin last January. Now it knows it has to: it needs the cash to help cushion some of the EPO blow (which may yet get worse following the next ODAC meeting in March) and, with commitments to cut 14% of staff, it doesn’t have the development muscle to deal with its entire pipeline in-house.

Not that motesanib is the crown jewel; far from it. It'll hardly be the first tyrosine kinase inhibitor to market, after all--hence Bear Stearns analyst Mark Schoenebaum's comment that the motesanib terms are particularly good for Amgen, since "we believe that the molecule's future is bleak."

Osteoporosis candidate denosumab is the company’s big hope—some say its only life-line—and Japanese rights to that went to Daiichi Sankyo last year, for what may now appear a rather paltry $20 million up front and $150 million contribution towards global development costs.

But Takeda’s nevertheless doing ok here. Twelve of the 13 Amgen assets are large molecules, granting the Japanese company its own foothold in biologics door, following similar moves by compatriots Astellas and Eisai Co. (along with most Western Big Pharma). Many of those were acquisition-driven, though (read more about the various strategies here).

By effectively signing a regional Japanese deal, Takeda gets to cut its teeth in biologics development alongside experts—albeit paying a price for that privilege—and will likely enjoy the comfort of ex-Japan approvals for some of the compounds before taking on the task itself at home.

And worldwide rights to motesanib—a small molecule—ticks another of the boxes on Takeda’s wish-list: international expansion. All Japanese firms (at least, all the larger ones) are desperate to expand outside their domestic market because of sluggish growth and harsh price cuts. That’s in large part what drove Eisai’s $3.3 billion cash acquisition of US spec pharma MGI Pharma in December 2007—a headline-grabbing transaction that Takeda will have badly wanted to answer to, if not, this time at least, out-do. (Read more about Eisai/MGI here.)

Photo "Pharma Spam Tower" by Flickr user shimown used under a Creative Commons license

$80 million upfront? About Average

So Synta’s PR firm were pushing today’s deal with GlaxoSmithKline at us as “one of the biggest product deals this year” and indeed “among the largest in the industry”…and it’s true, the $80 million cash up front deal for an anti-cancer compound that’s entering Phase III isn’t at all bad.

But $80 million up front isn’t off the scale, either. In fact, it’s looking about average these days for an asset on the cusp of Phase III—Merck in July paid Ariad $75 million up front for its cancer compound, Novartis put the same on the table for Antisoma’s similar-stage oncology asset in April, and outside of cancer, GSK paid $75 million for XenoPort's Phase III RLS compound in February, Shire that same magic figure for Renovo’s late Phase II wound care treatment in June.

Indeed, $80 million even begins to look measly alongside the $102 million that GSK forked out for Genmab’s Phase III antibody, or the $165 million that Johnson & Johnson coughed up for ex-US rights only to Vertex’s then-Phase IIa Hepatitis C gem.

Ok, so these were outliers. Genmab’s contained the antibody premium; Vertex’s was special, too. But the point is, three-digit up front payments for late-stage assets will soon be common, so don’t waste the hyperbole.

And don’t forget to look behind the curtain, either. Milestones: “Up to $1.01 billion in potential payments," our PR friends say. We all know this trick, though. That’s the if-everything-goes-to-plan-across-all-indications-and-the-moon-goes-blue (or biodollar) figure. Think $135 million in pre-approval milestones.

This, according to Synta’s CEO Safi Bahcall, is more than enough to cover the costs of the compound’s Phase III trials and US submission, which Synta stays in charge of.

And that—control—is the bit that’s interesting in this deal; more interesting than the amount of cash that’s changing hands (most of which GSK can capitalize, incidentally--so it doesn't immediately hit the P&L and thus crimp any R&D budgets). Synta will pay for and finish Phase III, and take the compound past the US regulators for metastatic melanoma. That allows the biotech to boast about the “confidence GSK has in our ability to conduct a pivotal trial and register the drug,” as Bahcall explained. But it also allows GSK to hedge risk and be absolutely sure the compound gets past regulators in the first indication before committing any of the $300 million of potential commercial milestones, or much of the $450 million in potential development and regulatory milestones in other cancers.

Still, Bahcall’s right in saying that “it’s unusual, given GSK’s experience, that they allow us to take the lead” in development and regulatory. Typically Big Pharma would want to take the reins, re-do the Phase III trial design and start talking to regulators. (Especially, you might think, given recent biotech casualties at FDA like the one that hit GPC Biotech when it tried to get satraplatin past.) Not this time—no doubt the compound’s fairly straightforward clinical trial design, with an objective end-point of progression-free survival, helped.

And if Synta gets the drug past regulators, it gains credibility in the next stage of the relationship: co-commercialization. That feature’s about average, too, for deals these days—many biotechs want to have their own sales forces, despite all the future problems and complexities and costs those forces bring.

In reality, pharma-biotech co-promotes are usually a nightmare, as we discussed in this IN VIVO feature. But Bahcall’s confident that the partners have learnt from what’s gone before, with specific prescriptions and conditions for how the co-promote would work, plus measures to ensure that Synta doesn’t lose out on the tiered profit share, thought to start at 40% and rise to 50%, based on annual net sales. (Profit shares can bite small partners if pharma ramp up their cost of sales to reduce what’s left to distribute.)

There are also provisions in the deal, according to Bahcall, allowing for Synta to assume more responsibility for commercialization in the future—once the drug has been out there for a couple of years, for instance (IN VIVO Blog speculation, not his comment). In other indications, the partners will share development in and outside US, with Synta eligible for double-digit royalties on ex-US sales.

Don't get us wrong: for all our talk of 'average', Synta’s got a good deal, all the more so given it’s the company’s first. Shareholders started celebrating earlier this week on deal speculation. They needed a party; Synta’s shares have done very little since its February IPO.

Antisoma Licenses AS1404: The Sequel

Only occasionally are sequels better than the original. The Godfather Part II. The Empire Strikes Back, of course. Add to those classics UK biotech Antisoma's second go-around with its vascular disrupting agent AS1404, which today it partnered with Novartis in a world-wide deal worth up to $890 million (including $100 million in near-term payments) plus royalties. Novartis will conduct and fund all development in all indications going forward.


Only ten months ago Roche returned rights to 1404 to Antisoma, on the same day Antisoma reported positive Phase II proof of concept results in lung cancer. Since then the biotech has issued a steady stream of positive news surrounding the product and hinted at serious interest from would-be pharmaceutical partners.

The original Roche deal was broad, encompassing Antisoma's entire clinical pipeline, including the Phase III ovarian cancer candidate pemtumomab, and a raft of Phase I compounds including 1404 (then known as DMXAA, and recently acquired by Antisoma from the non-profit Cancer Research Campaign for about $1 million). That deal included cost-sharing provisions for clinical trials of 1404 and other compounds but where Antisoma stood to gain the most was when drugs entered Phase III. Roche, citing commercial considerations, pulled the plug and returned all rights to Antisoma in June 2006.

At the time, noted Antisoma CEO Glyn Edwards today on a call to announce the Novartis deal, there was little clinical data available on 1404. "We were just starting to see survival data in the lung at that time," he says. There is a lot more clinical data available now, and Roche's decision was only partly related to 14o4 itself, says Edwards. The pharma's own portfolio was taken into consideration, and "Roche made the right decision for Roche just as Novartis has made the right decision for Novartis."

Roche it turns out also made the right decision for Antisoma. The Novartis deal is much more lucrative than anything Antisoma would have received from Roche, reflecting both the drug's clinical success to-date and the realities of biotech-pharma partnering today. Novartis will pay $75 million up front and $380 million in developmental milestones spread over four oncology indications and one non-oncology indication; future sales milestones could reach $325 million. Not least Antisoma has retained the right to co-promote the product in the US, a privilege Novartis will partially fund.

"Any Antisoma reps will have the ability to co-detail other Antisoma products" in the future, says Edwards, which "gives us a lower-cost, lower-risk entry into the US oncology market." It also means that in addition to adding early-stage assets via the biotech's business development efforts, Antisoma can also look to bring in mid-stage oncology candidates with an eye toward marketing niche products in the US, he says.