Sleep Tight, Kids!

Well, all that insomnia prescription/revenue growth had to come from somewhere.

According to research released today by Medco Health Solutions, the children are feeling verrrry sleeeepy. Just don't let them drive:

... use of prescription sleep medications by children under age 19 surged 45 percent between 2001 and 2006; and 52 percent among adults age 20 and older. ... Yet, with those increases have come increased scrutiny on some safety concerns of the medications in this class. In March 2007, the FDA requested that all manufacturers of sedative-hypnotic drug products, a class of drugs used to induce and/or maintain sleep, augment their product labeling to include stronger language concerning potential risks. These risks include severe allergic reactions and complex sleep-related behaviors, which may include sleep-driving, the FDA report stated.

Medco's release is of course designed to raise awareness of generic zolpidem; Sanofi's last Ambien patent expired on April 21st. The most recently available IMS data through April 20th shows Ambien holding onto nearly 41% of new insomnia prescriptions (Ambien CR, Sanofi's extended-release replacement, had nearly 20%), but generic competition from 13 companies means it shouldn't be long before that plummets.

As we wrote last year, market share in insomnia is known to shift quickly--and reliably--in response to DTC advertising. And as the IN VIVO Blog pointed out last month, those DTC ads have gained their share of admirers, and FDA attention.

Medco anticipates saving upwards of $150 million per year thanks to generic zolpidem. And they just might get away with it without the antics of Abe & the beaver, the butterfly, and those meddling kids.

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GSK: Seeding More CEDDs?

First there were CEDDs, then a CEEDD, and now, apparently, something in between the two. Confused? So are we.

Let's re-cap: In 2001, GlaxoSmithKline created a series of small, therapeutic area-focused R&D units known as Centers of Excellence for Drug Discovery (CEDDs). The idea was to improve R&D productivity. Four years on, realizing, along with the rest of the industry, that this would be tricky without outside help, GSK expanded the CEDD model to embrace external dealmaking, too. The Center of Excellence for External Drug Discovery (CEEDD) was born, with its own management, no in-house R&D, no particular TA focus but a brief to build broad-based, risk-sharing deals.

The concept seems to have caught on-- a good handful of Big Pharma, including AstraZeneca, Roche and Pfizer have since built their own flavor of biotech-like units, albeit (thankfully) with different labels.

So GSK is right to be proud (even though it's still a little early to judge ultimate output, notwithstanding impressive NCE numbers). But now, The IN VIVO Blog has learnt, the company is trying to stretch the model one more step further.

The idea, according to senior sources, is to create a sort of hybrid CEDD and CEEDD, with both internal and external R&D programs. Each hybrid unit (let's avoid more acronyms) will have about 100 staff (more than the CEEDD, but only about a third the size of a CEDD) but will have to build a CEDD-sized portfolio, in part through doing outside deals. Unlike the CEEDD, though, these hybrids will be TA-specific.

Should I say are TA-specific: the first hybrid is already up and running. Missed it? At the end of March 2007, GSK quietly announced a "newly organised research unit" dedicated to infectious diseases. The Infectious Diseases Center of Excellence for Drug Discovery, or ID CEDD (ouch) "will focus on building an innovative pipeline through both internal efforts and extensive alliances with other companies and research institutions," says GSK.

Hmm. So does this mean the CEEDD hasn't been doing its job properly? Apparently not--it has after all signed a series of broad-ranging deals, as planned, including with Chemocentryx and Epix. But sources fear the new structure will be a step backwards. Biotechs won't like competing directly with in-house programs, particularly when internal and external projects are managed by the same (likely strong-minded) team. That was, after all, why the CEEDD was created—with a (theoretically) independent management that didn’t have to listen to TA-heads if it didn’t want to.

Thus the new CEDD installation may be in danger of diluting the benefits of the last one. The danger is messages get mixed and everyone--including GSK's potential and existing partners--just wind up confused.

Don’t be too clever, GSK.

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Aim Low?

Another IPO, another bad haircut.

Yesterday Pharmasset, a virology-focused biotech with several clinical assets and a strategic alliance with Roche, priced five million shares on the Nasdaq at $9 apiece, well below its original $12-14 price range, and one million fewer shares than it had originally hoped to sell.

That the biotech IPO market is pretty miserable and has VCs running toward the steely embrace of Pfizer et al. is hardly news. But what grabs us is how just about every company--and just about every underwriter--manages to be so poor at predicting its value on the open market.

So few biotechs price within their stated IPO ranges that it's practically comical. Even the Pharmassets of the industry (companies that supposedly tick all the boxes for public investors: strategic alliance? check. proof-of-concept data? check.) get a poor reception, and pricing above the range is almost unheard of (the exception to that rule being Affymax, last year).

One factor may be the scarcity of significant biotech IPO investors, and the relative pricing power of the handful of specialists, a phenomenon we're looking at in the next issue of START-UP.

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Bristol as Biotech

Bristol-Myers Squibb is acting more and more like a biotech, and from various points of view.

First and most obviously, it's focusing on specialist medicines while hedging its bets in the far more expensive and risky world of primary care. The strategy turned out brilliantly for it, first in its 2004 deal with Merck on muraglitizar (the drug failed--but Bristol had bought a $100 million insurance policy from Merck, which nicely repaid at least some of its costs); and then in its more recent deal with AstraZeneca, sending two primary-care diabetes drugs to the UK company in return for, potentially, a much bigger pot of cash. Now, with its Pfizer deal, it's going one step further--selling rights to a primary-care product for a potential $1 billion.

In the second place, it's doing what biotechs like to do: take products to proof of concept and, now that proof-of-concept brings such enormous values from product-desperate licensees, sell them, unlocking cash and value that would otherwise be trapped for years. It's a strategy of disaggregation biotechs get--and pharma, by and large, doesn't. In effect, Bristol, like biotechs, are recognizing that it can't handle -- almost no one can -- the astonishing complexity and gambles that now define true vertical integration in the drug industry (among them: the different development, regulatory, manufacturing, marketing and reimbursement challenges, and risk profiles, of large and small molecules and primary-care and specialty businesses).

Third, Bristol seems to be saying that one of the things it does best is discovery and early stage development (not primary-care marketing and sales) -- an astonishing thought for anyone who knew the R&D impoverishment of Bristol in the 1990s, before it hired the late James Palmer, one of the unsung heroes of Bristol's R&D revival. In fact, part of the Pfizer deal brings Bristol development rights to a Pfizer discovery program with potential in diabetes and obesity -- but for which Pfizer will probably take on the lion's share of commercialization: Bristol looks largely to be applying development expertise (expertise evidenced in the earlier Merck and AZ deals).

But in one way, Bristol's program is very unlike a venture-directed biotech: the company is making itself rather difficult to acquire. When Jim Cornelius was named interim CEO, and given Bristol's generics disaster with Apotex and Plavix, most people saw his job as cleaning up the company for a sale. Instead--now that he's been named real, not just interim, CEO--he seems to be trying to clean up the company for continued independent life. With its major primary care products now in the hands of partners, it will be difficult for anyone (perhaps except its partners AZ and Pfizer) to afford a bid--particularly Sanofi-Aventis, its partner on Plavix and Avapro. In short, while biotechs and their investors like to keep their exit options open, Bristol seems to be aiming for a long life as a new kind of biotech.

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Bristol Continues Late-Stage Asset Sale

Bristol-Myers Squibb continued selling off pieces of its late-stage pipeline this morning with a monster deal with Pfizer worth up to $1 billion in upfront payments and milestones.

The move demonstrate's Bristol's biotech-like strategy of monetizing its assets prior to commercialization. Deals like this allow the Big Pharma to hedge its development bets while at the same time, perhaps, providing takeover insurance against the overtures of its most likely acquirer, Sanofi-aventis, its commercialization partner on the blockbuster Plavix.

Pfizer gets a piece of Bristol's Phase III anticoagulant apixaban, in exchange for $250 million upfront cash and up to $750 million in development and regulatory milestones. The companies will share profits and commercialization expenses equally and Pfizer will fund 60% of any development costs from January 1, 2007 onward. Apixaban is being studied in prevention of venous thromboembolism and prevention of stroke associated with atrial fibrillation.

Separately the companies said they would also work together in metabolic disease, in a deal centered on a Pfizer discovery program with potential in diabetes and obesity. There, BMS is paying Pfizer $50 million and the companies will split profits/losses and all expenses 60/40--with Pfizer picking up the lion's share of the tab and rewards.

Pfizer clearly hopes to fill the void left by the failure of torcetrapib, its HDL-raising compound that was yanked from Phase III trials last year. Bristol on the other hand is slimming down, placing its commercial emphasis in specialist marketing and partnering off its late-stage assets in a company-wide hedging process. Until today it's biggest move was partnering 50% of its most advanced diabetes programs to AstraZeneca, in a deal worth up to $750 million in pre-commercial milestones. Bristol also moved today to solidify James Cornelius' position as CEO, who has been the company's interim chief since last year.

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Back in the day

Riddle me this: What do hedge funds and steroids have in common? Both have undercut the significance of breaking long-held records, first in baseball (See Barry, above) and now venture capital.

The slew of venture capital surveys this week reported impressive totals for health care companies. In each case, biopharmaceutical and medical device companies finished the first quarter with record totals.

Why? The general press says investors finally have recognized that baby boomers will benefit from new technologies being developed by the companies. Yeah, well, most informed folks recognized that a very long time ago. But what’s really going on are hedge funds, private equity players and venture capital firms that are morphing into one or the other are pouring big bucks into companies with products, revenues and a legitimate shot at going public in one or two years because public investors are eagerly buying into these companies.

This is venture capital today, and there’s nothing wrong with that. This isn’t a traditionalist rant pining for the old days of day games, the reserve clause and start-ups built around pre-clinical products. But what’s off-putting is when venture capital counters include financings like the $110 million raised by CardioNet Inc. into the figures. In that case, a syndicate of hedge fund investors put up significant capital in exchange for discounted shares in the company’s pending (they hope) IPO. (For more complete terms see article in your April Start-Up.)

If the company goes public—and it should file this year—it’s a great deal for the company and its venture investors. But should deals in which public investors are pouring huge dollars into privately held companies simply to obtain the right to buy cheaply into an IPO be counted as a venture capital investment? Probably not. Should they be banned from venture capital figures just as steroids have been banned finally from major league sports? Hard to say. But just as Barry Bond’s assumed steroid use is tainting his charge to be the all-time home run king, big-ticket financings backed by hedge funds with their eyes on IPOs skews the record fund-raisings of today when they’re matched against years past.

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Press Release of the Week

To paraphrase The Late Show With David Letterman (and Perry Como), we get press releases! Stacks and stacks of press releases!

And don't get us wrong, The IN VIVO Blog is all for a good pun--sometimes, even a bad one. But this release from Datamonitor is a bit much. Roll your eyes with us, below.





If we hadn't regularly received press releases from this guy before, we'd guess even his name was in on the act. In any case, let this be the first in an ongoing series highlighting the good, the bad and the ugly (and the pun-riffic) of biopharma industry press releases. As if you hadn't seen enough.

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MedImmune Investors Get Paid

In a clearly opportunistic deal AstraZeneca is buying MedImmune for a whopping $15.2 billion ($58 per share). AZ says the acquisition will add significantly to its pipeline and complement the biologics discovery expertise within its Cambridge Antibody Technology unit with development and manufacturing skills and infrastructure. MedImmune also brings AZ for the first time into the vaccines space, an increasingly popular market for Big Pharma.

The price is a 53% premium to MEDI's closing price the day before it announced it was for sale, and 21% above its Friday close. But AZ investors hopeful that for all that cash the Big Pharma would boost its ailing late-stage pipeline (where it has suffered a handful of setbacks in the past few months) aren't likely to be pleased by the deal. MEDI CEO David Mott noted on a call today with AZ analysts that MEDI anticipates having only three to five projects in pivotal trials in the 2009-2010 timeframe. Most of MEDI's $1.3 billion annual revenue comes from sales of the respiratory drug Synagis ($1.1 billion in 2006).

The acquisition was first reported over the weekend by the WSJ ($), which noted their were four pharmaceutical bidders for MedImmune, including AZ and Eli Lilly & Co. The deal is the latest sign of biotechs increased leverage over product-hungry Big Pharma, and will further the agendas of biotech shareholders that argue for immediate satisfaction via M&A.

AZ will finance the cash deal with a variety of debt vehicles, according to AZ CFO Jon Symonds. The refinancing plan hasn't been put in place yet, he says, but "clearly we'll want to preserve our financial capacity to take further opportunities as they come. This is not the end of our externalization ambitions."

The company's next move is anyone's guess. After all, AZ went after MedImmune despite its protestations that it wasn't in the market for such a deal, suggesting Big Pharma in some cases doesn't know what it wants until it's presented with an opportunity--and if biotech investors get their way, many more such opportunities will come AZ and others' way. Just how does the acquisition of MedImmune jive with CEO David Brennan's comments during an extensive and exclusive interview with IN VIVO last month:

Q: Are larger bolt-on acquisitions out of the question?

I never say never. But bigger acquisitions are not really on the radar screen at the moment. We're focused on getting more quality products into the portfolio. Large-company transactions are complicated, painful, and take a lot of effort.

Good luck!

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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.

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The More The Money-er

The more Epogen, that is.

Just when you thought it wouldn't get any worse for Amgen, a new study published in the Journal of the American Medical Association suggests that for-profit dialysis chains are routinely administering higher doses of Epogen than necessary, thanks to the incentivizing nature of Medicare reimbursement.

Larger doses mean more cash for the dialysis centers, but may boost red blood cells beyond what FDA considers safe. New guidelines suggest going beyond the recommended maximum 12g/dL may cause "an increased number of deaths and of non-fatal heart attacks, strokes, heart failure, and blood clots." All four of the largest for-profit chains administered siginificantly more epoetin than the largest non-profit chains, according to the study.

The more epoetin used in dialysis-related anemia (where the market is all Amgen's), the more profit. And epoetin use is certainly on the rise. According to the study:

"... between 1991 and 2005, the mean dose of epoetin increased about 4-fold in dialysis patients. Today, epoetin therapy is the largest single Medicare drug expenditure totaling $1.8 billion in 2004 (an increase of 17% from 2003) and epoetin comprised 11% of all Medicare ESRD costs."

As we noted last week upon the escape of Amgen CFO Richard Nanula, and as the usual suspects in the pharma blogosphere point out, things are far from rosy at Amgen these days, where the stock is at a 2-year low. FDA warnings, safety concerns across the board, lawsuits, even potential biogeneric competition: Amgen's EPO franchise is under siege. We'll take a look at where the Big Biotech will turn next in the May IN VIVO.

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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.

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Strategic Alternatives: MedImmune Edition

Medimmune is exploring strategic alternatives, including a possible sale of the company, with the help of bankers Goldman Sachs. Investors apparently like the idea: MEDI shares (already up 20% in the past couple months) are up more than 12% this morning and knocking against five-year highs, and the company's valuation has broken through the $10 billion barrier.

And why wouldn't they? All signs point to sweet takeout valuations by pharma desperate to beef up pipelines. Schering's takeover of Organon is in the same ballpark, valuation wise, and while Medimmune can't boast five products in Phase III studies like Organon, it's pipeline is arguably broader and deeper. Plus Medimmune operates in vaccines and biologics, two sought-after capabilities in Big Pharma these days, and is growing at a nice clip: on Monday the company announced that it expected first quarter earnings to triple over 2006.

MedImmune has suggested it is interest from certain pharmaceutical companies and dissatisfaction on the part of certain shareholders (i'm looking at you, Carl Icahn) that led to the move.

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Amgen's CFO: Escaping a Sinking Ship?

It may have been a coincidence. But Amgen CFO Richard Nanula's timing in announcing his departure this week to "pursue other opportunities" raised some eyebrows. The Amgen ship is under attack as it has never been before, and the list of invaders is long: clinical setbacks (think Vectibix), safety concerns over key drugs (think black box warnings on Aranesp and Epogen), SEC scrutiny (into whether the firm divulged Aranesp data on time), competition (generic and otherwise) to its multi-billion dollar anemia franchise, and lawsuits (Johnson & Johnson on marketing contracts, Roche on Micera).

No wonder Nanula is fleeing. The numbers have turned bad: annual profits fell 20% last year. More than $20 billion has been wiped off the group's market capitalization in the last six months. Investors are abandoning a once-favorite stock, prompting some analysts to speculate on whether Amgen is a takeoever target.

It's not all doom and gloom (certainly not for Nanula, anyway, who after six years as CFO doubtless would like more time to spend whatever's left of his $8 million 2006 compensation package). Amgen is still, valued at $60 billion or so, larger than many Big Pharma firms. Vectibix, although wounded, isn't dead. The Aranesp scare--a higher risk of death among cancer patients no longer on chemo--applies mostly to a small segment of patients, for which the drug is not officially approved anyway (and now won't be).


Still, the invadors are real, and Amgen is starting to look mightily dependent on one particular asset in its late-stage pipeline: denosumab, a potential blockbuster drug to treat osteoporosis (and, Amgen hopes, a tonne of other diseases, including cancer). As one analyst puts it: "God forbid anything should happen to denosumab".


Indeed. But God didn't help Vectibix much: this was the star drug, touted as a potential $2 billion product, that drove Amgen's $2.2 billion acquisition of Abgenix in December 2005. Vectibix is approved for third-line colorectal cancer, but 2007 sales were less than $200 million, and aren't forecast to get much higher.


For now, Amgen is busy defending its marketed portfolio. But senior management should consider taking Nanula's departure as a cue to start more visibly putting energy into Amgen's post-EPO future rather than its shaky present. Perhaps Nanula's successor, former investment banker Robert Bradway, will have less trouble dealing with a period of less than stellar growth. He's only been with Amgen a year.

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Take a Deep Breath, Pfizer, and Think Again

It's just what Pfizer didn't need: another expensive failure.

Less than six months after the much-vaunted Lipitor-replacement torcetrapib tanked, it's now official that the Exubera launch is a flop. The numbers say it, the newspapers say it, and even Pfizer’s own executives acknowledge that “we still need to figure out how to market Exubera.”

Not surprising, perhaps—Pfizer isn’t exactly a large molecule expert, and Exubera, as the first ever inhaled insulin, presents even more challenges for its sponsor than your average biologic.

First, doctors must be convinced of the drug’s advantages over existing treatments; not just longer-acting insulins such as Levemir, marketed by diabetes-leader Novo Nordisk, but also since late 2006, Merck & Co.’s star DPP-4 inhibitor sitagliptin (Januvia), a rare industry success story (to be followed by recently-approved Janumet, a combination of Januvia and metformin).

Then, time-constrained docs must learn how the inhaler device works (and adapt dosages, which are different when insulin is inhaled rather than injected). If they get past that hurdle--and aren’t swayed by detractors such as Dr. John Buse, president-elect of the American Diabetes Association, who says that Exubera may present a safety risk in Type I diabetics--then their patients must get used to carrying an umbrella-sized device around with them (and paying more for the privilege: Exubera costs $2-3 more per day than injectable insulin).

So Exubera is being chosen for just one in 500 insulin prescriptions in the US, despite Pfizer’s investment—900 part-time diabetes educators, over six months of doc-targeted marketing, and considerable sales rep resource, in part diverted from other more profitable drugs. Analysts have slashed Exubera sales forecasts, in some cases to barely more than $300 million by 2012.

But Pfizer’s not giving up. “Don’t write Exubera off,” warns a senior executive at Pfizer. “We’ve screwed up before on launch, and the drug has come back.”

The company will soon launch a fresh marketing campaign, a summer DTC advertising splurge (very unfashionable), and reckons that transferring Exubera promotion to its highly successful CV team might make the difference.

Chances are it won’t. Marketing inhaled insulin—effectively a niche drug, despite initial forecasts of peak-sales of up to $2 billion—isn’t like marketing a primary care pill. You can’t use the same tricks.

“Patients will be inhaling insulin over the next few years,” insist Pfizer executives. Sure, but how many, and whose product? By the time Pfizer figures out its promotional game, competition will be even worse, even if there is a market. The handful of inhaled insulin alternatives in Exubera's wake have smaller, more discreet devices, and will benefit from Pfizer's experience in figuring out how to make breathing in one's insulin more attractive than injecting it.

“You may wonder whether Exubera could be right for you,” says Pfizer’s product website to prospective customers. Despite its brave face, Pfizer must be wondering whether this drug is right for it, too.

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Everybody Plays, Everybody Wins

Theravance's November 2002 deal with GSK around long-acting beta agonists (the heart of GSK's blockbuster Advair franchise) was designed to foster cooperation and trust between the partners. The two companies' assets were pooled--in this case four molecules from each side--and a potential conflict of interest was avoided: no matter which of the eight LABA candidates was chosen as GSK's best bet, Theravance would get paid (though the economics were slightly different, depending).

For Theravance, it was a smart move. Yesterday the companies announced results from two Phase IIb trials for two once-daily LABAs, one from each company's stable, and GSK's 642444 came out on top.

As a result, Theravance (whose 159797 candidate also posted positive results in Phase IIb) will have to pay an undisclosed milestone to GSK upon '444's approval. As we wrote at the time, this eventuality was built into the deal: royalties paid to Theravance are solid (an estimated 13% of the first $4 billion in sales of the LABA alone and the LABA/corticosteroid combo product--the Beyond Advair program--and 9% on sales over $4 billion) and should allow the biotech to establish a line of credit without too much trouble.

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Novartis' Irritable Blockbuster Syndrome

Novartis has a Zelnorm problem.

Not anymore

The Swiss drugmaker suspended sales of the IBS drug on Friday at the behest of the FDA, which wants an advisory committee to weigh in on the significance of a safety signal unearthed in an 18,000 patient retrospective analysis of trial data. Novartis sold $561 million worth of the drug in 2006.

The data suggested Zelnorm patients were more likely to experience an ischemic cardiovascular event than placebo patients (one in one thousand for the Zelnorm group, one in ten thousand for the placebo group), though Novartis has noted that the rate in the treatment group more closely hews to the rate in the general population and each of the effected patients had other risk factors for such events.

Analysts have removed Zelnorm sales from their models, for now, awaiting FDA's decision.

IBS has been notoriously tricky for pharma, though the massive potential market size has meant no shortage of compounds in development. Only Nelnorm and GSK's Lotronex have made it to market in the indication, neither has been particularly successful, each has serious GI side effects, and now each has been pulled from the market--albeit temporarily. Lotronex was yanked in 2000, nine months after launch, and returned to a much narrower market by popular demand in 2002 with a black box warning.

Zelnorm's suspension is potentially temporary--which would mean less of a liability headache for Novartis even if sales never recover. Lotronex's did not--though the safety concerns for the two drugs are very different.

(Graphic from "Building a Business in Drug Safety," Jan. 2006, The RPM Report)

But sources close to Novartis note that the company had originally asked FDA not to simply pull the drug—but to contraindicate its use, with a black-box warning, for at-risk popualtions: older women and those with cardiovascular risk factors. The drug still should be available, Novartis argued, for younger women (roughly 40% of its users, who usually get severe constipation during menstruation).

FDA said no. Until the situation is more clearly understood, there was no reason to run the risk: IBS isn’t a fatal disease; there are—inadequate—alternatives; better safe than sorry, said the Agency.

Novartis was in no position to disagree. But it must be feeling picked on: the Zelnorm suspension is its second bit of bad regulatory news in weeks. Even worse: FDA’s “not yet” on Novartis’ most important pipeline drug, Galvus, back in January – while giving Merck’s competitive Januvia and Janumet the all clear – and what is likely an insuperable competitive lead.

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