Deals of the Week: Deal--or No Deal

The debate over Vytorin's medical benefits and, by extension, the utility of all cholesterol meds, continues to rage. Meantime, the Zyprexa marketing scandal reared its head: new this week, the NY Times reports Lilly is in talks with federal prosecutors to settle investigations into its marketing of the antipsychotic. If an agreement is reached, it could cost the pharma $1 billion, the largest fine ever paid by a drugmaker for breaking federal laws governing a medicine's promotion.

And, it was earnings week, with fourth quarter reports from Wyeth (up, but flat forecast for '08 due to generic Protonix), AZ (down), BMS (down, and WSJ's Health Blog highlights concerns that this big pharma may be affected by the sub-prime mess), Novo Nordisk (down, but did beat analysts' expectations sending the stock up), and Merck (down, thanks to Vioxx settlements) among others.

All in all, a crazy week, but not necessarily on the deal-making front. That's prompted this IN VIVO blogger to ponder the deals that happened--and those that did not. Without further ado, the Deal or No Deal edition.

First, a look at the actual deals that got done...

Inverness/Matria: On Monday Inverness announced its third major acquisition in the health management space, buying Georgia-based Matria for $900 million and the assumption of $280 million in debt. Definitely the big money deal of the week, though Wall Street reacted negatively to the news. Inverness continues to build through acquisition: the Matria deal is its twelfth in the past 12 months. (For more on Inverness's acquisition strategy, click here.) The company's recent emphasis on health management suggests another trend we've been following: the expansion of the diagnostic business model to include services not exclusively related to in vitro tests or reagents. Such business activity has muddied the waters stretching the definition of what it means to be a diagnostic company.

Sepracor/Nycomed: A few weeks ago when Nycomed got FDA approval for its inhaled corticosteroid ciclesonide we figured Sanofi-aventis, the original partner of Altana (bought by Nycomed in '06), still had US rights to the drug--we hadn't heard otherwise, after all. So we were a little surprised on Monday when Sepracor picked up rights to the drug (Alvesco) for $150 million upfront plus various development and sales milestones. Nycomed will also receive payments for manufacturing and royalties on sales. Alvesco's route to the US market has been chock-full of speed bumps. Way back in 2002 Altana suggested the drug might be approved in 2003, but an NDA wasn't filed until December 2003. Altana and Aventis received an approvable letter in October 2004 and the drug was launched in 2005 in Europe.

Iroko Pharmaceuticals/ Merck: Specialty pharma Iroko inked a deal with Merck for non-US commercial rights to Aggrastat, a drug used alongside heparin in patients with unstable angina to prevent cardiac ischemic events. Financial terms of the deal were not disclosed. This is the third product Merck has out-licensed to Iroko and the second in the beleaguered cardiovascular space. Last spring the company acquired rights to Indocin, for rheumatoid arthritis, and Aldomet, a hypertension treatment, from the big pharma. As we reported here, the independent futures of many spec pharmas are in question, as product-poor pharmas gobble them up in hopes of fattening their pipelines. Still, primary care remains a popular space for many, especially as big pharma eschews risky products in the cardiovascular and metabolic disease space.

(Clearly someone forgot the briefcase models.)

BiogenIdec/Genmab: Perhaps we should say "No deal, yet." This week BiogenIdec was once again in the news thanks to manueuvers by Carl Icahn to install three supporters onto the company's board. Also swirling in the ether, rumors that BiogenIdec intends to buy Genmab. Certainly, such a deal would scupper any attempts by Icahn to sell the company to another entity. Adding Genmab's pipeline would go a long way to securing an independent future for the Cambridge, MA-based biotech. But such a deal won't come cheap. In part, because it seems likely that GSK might up the ante. The British pharma, after all, has three partnerships with Genmab, including a very rich co-development, co-promotion deal for the biotech's HuMax-CD20, an antibody to treat cancer and rheumatoid arthritis. Until now, GSK's had no real reason to bring Genmab in-house--it's already got rights to the antibody cow's milk, after all. But it may not be willing to stomach the risk associated with a change in Genmab ownership, deciding its worth the hefty price tag to nail down its rights to its partnered products.

Lilly/Gastrotech: Deal or No Deal? Here's an odd one for you. On Jan 28, Denmark’s Gastrotech Pharma announced it was in-licensing Lilly’s GLP-1 analog GTP 010 for IBS and functional dyspepsia. That’s a deal, not a non-deal, surely? Well, depends on how you look at it. Simply turn it over and you get….a non-opt-in by Lilly.

Lilly and Gastrotech had been collaborating on GTP 010 since 2004, when Gastrotech took over Phase II trials of this Lilly compound in IBS and dyspepsia (in part thanks to the biotech’s ownership of some use patents for GLP-1 analogs in IBS, according to chairman Hans Schambye, though no, that wasn’t mentioned in the release).

That—four years ago--was arguably the real licensing deal. And that was also when Lilly received an option to later take over development and commercialization of the compound in return for milestones and royalties.

This week's news is that Lilly didn’t take that option, which means Gastrotech gets to keep the compound, instead, paying Lilly royalties. “Sure,” Schambye acknowledged to IN VIVO Blog, “you could look at it both ways. Either party could have licensed the drug.”

See? Hmm, exactly. Now ok, we know that small biotechs need all the positive spin they can get, but we're getting pretty close to "Press Release of the Week" territory here. Perhaps Gastrotech will do something big with 010, who knows (Lilly did take an equity stake). But please, a bit of clarity and objectivity wouldn’t go amiss.

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The Big Winner in the Vytorin Debacle? It Might be Lilly

Steve Nissen's latest star turn, advising doctors everywhere to stop using Vytorin until there is better evidence it improves health outcomes, is surely going to be a boon for Pfizer and AstraZeneca.

Those companies' good old fashioned statins (Lipitor and Crestor, respectively) will surely pick up a bit of ground in the cholesterol market.

But that is sure to come at a price: If (when?) Congress holds hearings on the Great Cholesterol Coverup (we’re guessing at the hearing topic here), you can bet everyone in the cholesterol class will take some lumps for their aggressive marketing. It won’t help that the Energy & Commerce Committee which is investigating Vytorin is also investigating Pfizer’s Lipitor DTC campaign.

Here's another company that stands to gain: Eli Lilly & Co.

Why? Because the emergence of Steve Nissen as perhaps the most visible critic of pharmaceutical industry practices and products means that people are sure to pay even more attention when he says a drug company did things right.

Here is what Nissen had to say about Lilly's anticlotting drug prasugrel during our FDA/CMS Summit for Biopharma Executives. "The company did a courageous trial against an active comparator and they informed the medical community: What were the benefits, what were the risks, and a reasonable and sensible person can look at that and say I get it.”

"The results with prasugrel were a very good result," Nissen said. "The drug prevented more myocardial infarctions than the bleeding episodes it caused. I think the drug is an advance."

Nissen said more or less the same thing to the New York Times when the pivotal trial results on prasugrel were published, and he has since given more interviews underscoring his belief that the drug should be approved by FDA as quickly as possible.

That, to put it mildly, would be wonderful news for Lilly. The company lost about 15% of its value during the fourth quarter as Wall Street fretted about the mixed data. (The RPM Report has just published more on this topic on our website. You have to be a subscriber to The RPM Report to read our complete analysis, or sign up for a 30-day free trial to get a taste of what you are missing.)

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Deals of the Week: The Christmas Edition

'Twas four days before Christmas and all through the house, not a creature was stirring except for...the biz dev teams at several major pharmaceutical companies. My, has it been a busy week for those folks.

It's almost as if the Ghost of Christmas Yet to Come paid them a visit, offering a cautionary tale of the industry's fate 20 years hence: A graveyard filled with names like Pfizer, GlaxoSmithKline, and Eli Lilly. Perhaps, not wanting to be boiled in their own puddings or buried with stakes of holly through their hearts, the good folks at Big Pharma decided to spread some Christmas cheer via deal-making. (Or maybe they just needed a little retail therapy.) Without further ado:

Pfizer/CovX: Pfizer announced Tuesday it was buying the privately held next-generation protein play CovX for an undisclosed sum. The La Jolla-based biotech has developed a platform technology that links therapeutic peptides to antibody scaffolds. Already the company has three early stage compounds, one in diabetes and two in oncology. "The deal demonstrates Pfizer's ongoing commitment to build a competitive biotherapeutics enterprise, " said Corey Goodman, PhD, president of Pfizer's Biotherapeutic and Bioinnovation Center, in a press release. The acquisition bolsters Pfizer's large molecule discovery capabilities, but probably doesn't constitute an engine ala Bristol-Myers acquisition of Adnexus. As we wrote here, Pfizer appears to be a big believer in acquiring biologics capabilities through a serial acquisition strategy. Among its recent deals: the acquisitions of PowderMed, Rinat, Biorexis, and Bioren.

Merck-Serono/Idera & Merck-Serono/Flamel: Merck-Serono inked two deals this week. The first with TLR player Idera for two TLR9 compounds in the oncology space worth $40 million up-front and an additional $381 million in milestones. Not too surprisingly, shares of Idera surged on the news. It's the only big deal the biotech has inked in 2007: the company's last deal came about a year ago, when it signed a partnership with the other Merck worth $30 million in upfront payments. Merck-Serono also announced a collaboration with Flamel Technologies, which has developed a polymer drug-delivery technology called Medusa that can extend the activity of therapeutic proteins. Deal terms were small: just $2 million for investigating a protein in Merck-Serono's portfolio, as well as Flamel's R&D costs. This is the fifth deal Flamel has signed in 2007. Three months ago, it agreed to develop a controlled-release version of a protein for Wyeth.

Lilly/Ambrx & Lilly/BioMS & Lilly/Galapagos: Clearly Lilly execs took the Ghost of Christmas Yet to Come's message to heart. This pharma wins the honor for signing the most pre-Christmas deals, inking three this week alone. (And that doesn't count the news that Sidney Taurel, the pharma's pugnacious CEO and chairman, will cede his CEO hat to the friendly giant John Lechleiter, PhD, currently the company's president and COO.) On Monday, the company signed a research collaboration with Ambrx, a protein engineering company, for an undisclosed upfront fee and milestones. The deal builds on an existing collaboration signed by the two companies at the beginning of 2007. And Lilly execs should be quite familier with Ambrx: one of the biotech's co-founders, Richard DiMarchi, now a chemistry professor at Indiana University, spent two decades at Lilly as a VP of Biotechnology. On Tuesday, Lilly signed a rich licensing deal with the Canadian drug company BioMS for its multiple sclerosis therapeutic MBP8298. As part of the deal, Lilly will pay BioMS an $87 million up-front fee plus milestone payments that could reach $410 million. The two companies will share development costs, while Lilly will take over world-wide marketing. Finally, on Wednesday Lilly announced a smaller deal with Galapagos to develop potential new medicines for the treatment of osteoporosis. Galapagos will be responsible for discovering and developing drug candidates through proof-of-concept, at which time Lilly has the option to develop and commercialize them on a world-wide basis. Lilly, of course, has a great deal of expertise in osteoporosis thanks to its experience developing Evista, Forteo, and arzoxifene.

Medtronic/Weigao: On the device side, Medtronic, which has been beset by bad news associated with its defibrillator, announced Monday it was purchasing a 15% equity stake in Shandong Weigao Group Medical Polymer Company (Weigao) for $221 million. In addition, the two companies will form a JV to market therapies in the spine and orthopedic sectors. "China is key to our global strategy as we continue to expand our geographic footprint," said Medtronic president and CEO Bill Hawkins in a press release. Hawkins' comments echo those of many pharma execs. China remains an alluring prospect for both western drugs and devices, in part because of predictions that by 2020 it will vault to second in pharmaceutical market size with a market of $120 billion according to IMS Health. (Look for more on China's fledgling biotech industry in an up-coming START-UP.)

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Prasugrel: Lilly Tries to Stop the Bleeding (Part 2)

The speculation about the prospects for Lilly’s clot prevention drug prasugrel continues.

The latest turn has been a rebound for Lilly, prompted at least in part by a November 28 note by Credit Suisse analyst Catherine Arnold. The note reports some interesting survey data on projected use of prasugrel by cardiologists. What Arnold heard in the responses is further support for her view that the drug will indeed be a significant new product for Lilly, with peak sales in the range of $2.5 billion.

Lilly shares have been on a rollercoaster ride for six weeks now surrounding release of the pivotal trial data for prasugrel. Unfortunately for Lilly, most of the ride has been downhill. (We wrote about Lilly CEO Sidney Taurel’s response to the media and investor frenzy surrounding prasugrel last week.)

For now, many analysts remain concerned about an increased risk of major bleeding associated with the drug. In today’s world, they fret that even a demonstration of superior efficacy vesus the market leader, Bristol-Myers Squibb/Sanofi Aventis’ clopidogrel (Plavix), isn’t enough to overcome any hint of a safety risk.

The pivotal trial data undeniably limit the market for prasugrel (approximately 20% of the patients enrolled in the trial were in one of three subgroups Lilly says shouldn’t get the drug). Some analysts expect that the impact will be greater than that, with doctors choosing the more conservative approach of using Plavix first as much as possible. And the biggest fear of all is that FDA simply won’t approve the drug.

Arnold, clearly, is in the more bullish camp. In her view, investors have over-reacted to the safety issue. Even with limitations on the patient population, prasugrel only needs to capture about a 25% share of the current market for Plavix to generate $2.5 billion in peak revenues.

That type of market share is very achievable, Arnold says. The survey suggests that cardiologists will use prasugrel in more than a third of their PCI patients.

“Surprisingly, the respondents were also very likely to use prasugrel in patients with coronary artery disease who are being medically managed (patients with unstable angina or a recent MI who do not undergo PCI) and patients with established peripheral arterial disease,” Arnold reports. “These are large segments of the antiplatelet market where there is no data to support the use of prasugrel currently but, based on these results and other research we have conducted, we think prasugrel will generate modest off-label use.”

That sure sounds like good news for Lilly. But is it?

The willingness of cardiologists to shrug off the safety questions about prasugrel may be perfectly justified medically, and it would certainly be a great boost for the drug commercially. But it is also exactly the reason why FDA has been so tough on NDAs—and why Congress has given the agency new drug safety tools to control the use of new drugs after approval.

To us, the path for approval of prasugrel seems clear. First, Lilly needs to convince FDA that the subpopulations it has identified where the drug should and should not be used are indeed supported by the data. Lilly says the risk/benefit profile is not supported for the drug in patients over 75 years of age, patients who weigh less than 60 kg, and patients with a prior history of stroke or transient ischemic attack. If those patients are excluded from treatment, the relatively benefits of prasugrel look even better compared to Plavix.

Second, and most important, Lilly will need to convince FDA that the drug will in fact only be used by the subpopulations for which it is appropriate. In that case, the perception that cardiologists are eager to use the drug more broadly actually hurts—rather than considering the risk benefit profile if only the right patients use it, FDA has to consider the risk benefit profile if the wrong patients use it.

FDA’s decision on prasugrel will almost certainly come down to Lilly’s ability to present a credible risk management plan that will give FDA the confidence to say yes to the drug. In that context, the survey data showing a readiness for cardiologists to use prasugrel off-label is an obstacle, not an opportunity.

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Prasugrel: Lilly Tries to Stop the Bleeding (Part 1)

We were a bit taken aback by Lilly CEO Sidney Taurel’s editorial in the Wall Street Journal earlier this week recounting the damage done by the frenzy of speculation about the prospects for the platelet aggregation inhibitor prasugrel.

Taurel takes financial journalists to task for trading in “leaks and rumors where scientific data are concerned” and calling on “would-be pundits” who “have not had firsthand exposure to the scientific results or specialized knowledge under discussion” to “qualify your comments if you must make them at all.”

Its not that we disagree with Taurel. Like most self-respecting journalists, we are only too happy to join in any critique of the sloppy practices of our competitors (since we of course are the exception that proves the rule, right?).

No, what took us aback about the piece was its premise: the almost quaint notion that pharmaceutical companies can somehow put the genie back in the bottle and have the final say in when or how information about their products—even unapproved products like prasugrel—will be disseminated to the public.

Taurel’s argument, in effect, is that journalists, analysts and investors should have waited patiently for the release of the pivotal trial data on prasugrel (the TRITON study) at the American Heart Association meeting November 4, rather than engaging in a frenzy of speculation based on news that Lilly had suspended two other trials of the drug. Lilly decided to report that data there, and in a companion piece published by The New England Journal of Medicine.

Lilly, of course, couldn’t release the data early because it committed to an embargo prior to the AHA presentation. “Such guarantees of exclusivity are not only common, but also appropriate, in focusing expert attention on important research,” Taurel writes. “A definitive source and a ‘zero hour’ of first-hand disclosure for complex scientific data help to limit misinformation.”

Ah, the good old days. Things used to work that way for sure. But in the era of the internet, clinical trial registries, managed care claims databases, FDA drug safety newsletters, and emerging active surveillance systems, it is simply no longer possible for drug sponsors to hope to control the information flow about their products. (Not too mention the unbelievable proliferation of would-be pundits known as bloggers.)

In this case, Taurel laments, “10 days before our ‘zero hour,’ word leaked out, causing us to confirm that the two prasugrel trials had been suspended, although our promises to NEJM and AHA prevented us from explaining why.”

The truth, as Taurel explains, was that prasugrel performed very well in the pivotal trial, but that there were “three small subgroups of patients” in whom a risk of excessive bleeding appeared to outweigh the benefits. “Based on the small chance that patients in the three identified subgroups might be given prasugrel and experience serious bleeding, we advised our researchers to suspend the two trials pending a review,” Taurel writes.

But the damage was done. “The media entered a feeding frenzy, catered by commentators on Wall Street and elsewhere who speculated that prasugrel posed broad risks and had probably failed its major trial. Our stock began its trip south and, more seriously, some doctors and patients were left with false impressions.” Lilly’s shares recovered somewhat after the data were finally reported on November 4.

We might quibble a bit with choosing prasugrel as the case to make this argument—claims of patient harm seem overdone here when we are talking about a drug not yet approved by FDA. Commercial harm, yes. Harm to Lilly’s investors, yes. But it is a bit of stretch to say patients were harmed.

But still, Taurel is right about the potential for media feeding frenzies to cause tremendous harm. Its happened before, for sure. Maybe Avandia is an example, or even Baychol—cases where coverage of an unexpected side effect led many patients to discontinue treatment on their own, leaving at least the possibility that more harm was done by untreated diabetes or high cholesterol than by the adverse events in question.

Even so, Taurel sounds a bit like Lear raging against the storm. We understand his concern, but it is hard to imagine any way he or any other industry CEO can reverse the winds.

We aren’t the only ones who think that. Plenty of smart people in government and industry are talking about the revolutionary changes in information flow about medicine—including a whole bunch of executives at Lilly. In fact, though this is impossible to handicap, we would be willing to bet that Lilly is at the forefront of recognizing and adapting to a world where the pharmaceutical company sponsor is no longer at the center of the information flow about drug products.

We have heard several Lilly executives speak publicly and privately on this very theme. During a panel discussion on clinical trial policy at the University of North Carolina in February, one Lilly executive talked about the move towards active surveillance as potentially engendering a “Wikipharmacy” model in which product use information is no longer generated by FDA and the sponsor in labeling negotiations, but rather by a global community of users exchanging information on real-world experiences with the drug.

And Taurel himself has talked about it. During a policy address at the Cleveland Clinic early this year, Taurel focused on the revolutionary potential of healthcare IT advances. He even talked about the importance—and benefits—of public access to data once jealously guarded by manufacturers.

“For businesses that generate health data and new knowledge, it’s time to learn the benefits of openness," Taurel said in Cleveland. He went on:

"We need to open our minds to the notion that electronic outcomes data – once the privacy of individual patients is protected – represent a legitimate ‘commons,’ a resource to which access should in most cases be widespread and easy.”

“That’s not to ignore the fact that great effort and expense goes into collecting many types of health information. Certainly at Lilly, we spend hundreds of millions of dollars every year on clinical trials. But the key insight in our situation, and I think it applies quite broadly, is that unlike most other assets, health information actually becomes more valuable the more it is used, studied, and applied. It does not depreciate.”

So what gives with the Journal editorial? Did Lilly decide that openness is wrong? Hardly. Taurel even repeats his argument that openness is critical for industry: “Trust hinges on our openness in sharing everything we know about who should use our products—along with when, how and at what dose—and who should not.”

What we are really seeing here is not a vain attempt by a pharma company to turn back the storm, but an example of one way to try to advance against the wind.

The frenzy around prasugrel hurt Lilly, but it also provided an opportunity for the CEO to talk about the product in a prominent forum. The fact is that Lilly (and its partner, Daiichi Sankyo) plan to submit a new drug application based on TRITON to FDA before the end of the year. Anything Lilly can do to shape the climate for that review is critical.

When you look at it that way, maybe the most important line in the editorial is the sentence at the end of the fifth paragraph, citing a quote from the Journal’s earlier reporting on prasugrel: “If you can't get a drug on the market with that kind of data, we should stop developing drugs.” That is a message not just for business and science reporters, but for FDA reviewers as well.

So will Lilly get this drug on the market with this kind of data? Coming Monday, one would-be pundit will share his thoughts on what it will take to make that happen.

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While You Were Acquiring

Back when we ran our "who's gonna get bought next" poll on the IN VIVO Blog most of you followed the herd--and chose Biogen Idec. All of you who chose "someone else," take a bow (we know you had Pharmion in mind). Tonight Celgene announced it was buying the cancer-focused biotech firm for $72 per share, for a grand total of $2.9 billion. We'll have more on this on Monday. (Had this deal not happened we may have gone with "While you weren't covering the spread against MIAMI.")

• In other news--does anyone else feel like the world is hurtling toward the 99-cent genome? Forget the $1000 genome, Bionanomatrix is touting its efforts toward a $100 genome (last Monday's Philly Inquirer). And on Friday consumer genomics hit the front pages, as Iceland's deCODE Gentics announced its deCODEme business and Google/Genentech-backed 23andme responded with a 'we're launching our business too' press release late Friday afternoon. Saturday's New York Times has a review of those efforts and more. The Financial Times chimes in as well.


• Barron's isn't confident that prasugrel's data is enough to buoy Lilly, reports Reuters.


• Just when you thought there was nothing more to write about insomnia. The New York Times magazine presents the 'sleep-industrial complex.'

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While You Were at AHA

Well, the big prasugrel v clopidogrel showdown went down pretty much how observers expected it would: Lilly's prasugrel has the edge in efficacy--cutting heart attacks by 24% over Bristol/Sanofi's Plavix--but comes with an increased risk of bleeding. The press release is here. The WSJ covers the news here. We'll probably have more on this later.

• In other AHA news, Integrilin: a little jab'll do ya. Probably not great news for Schering-Plough, which, unsurprisingly, did not fund the study that suggested angioplasty patients do just as well with a significantly smaller dose of the drug.


• The New York Times chronicles Pfizer's fight to protect its Lipitor franchise from incursion by generic simvastatin. As the Financial Times pointed out last week, AstraZeneca has its own simvastatin-induced challenges with its blockbuster statin Crestor.


• GSK's gepirone antidepressant received a non-approvable letter from FDA. This is the third time FDA rejected gepirone, previously under development at Akzo Nobel (Organon), so not exactly a shocker.


• A study in Nature published on Sunday describes a new lung cancer target. Mutations in NKX2-1, which controls the activity of alveoli, may be responsible for up to 12% of lung cancers, according to researchers led by Matthew Meyerson of the Dana-Farber Cancer Institute and the Broad Institute. Reuters has the story.


• The Boston Globe looks at MIT professor Lenny Guarente's dormant relationship with Elixir Pharmaceuticals, the about-to-go-public company he founded in 1999, and his potential relationship with Elixir competitor Sirtris Pharmaceuticals.

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Deals of the Week! Inaugural Edition

We at IN VIVO Blog recognize that it's practically impossible to keep up with the deal flow in biopharma, let alone remember the specifics. (Hey, it's hard for us and we do this for a living.) So we've decided to start posting a weekly column highlighting interesting and potentially important deals that you may have missed as you ponder weightier questions such as: To buy or not to buy Biogen Idec? Look for this every Friday. Aspire to be a part of it. Dare to dream.

• BMS/Pharmacopeia (10/15): BMS is at it again. Pharma's champion externalizer has out-licensed its selective androgen receptor modulator (SARM) program, to New Jersey-based Pharmacopeia. The deal is further proof that BMS believes in monetizing programs that don't fit its therapeutic focus in oncology and immunology. Unlike past deals with AstraZeneca for dapagliflozen and saxagliptin and Pfizer for apixaban, where there was big money on the table, the dollar amount for this deal was zero. Pharmacopeia bartered up to three years of its medicinal chemical expertise applied to one BMS discovery program in exchange for the rights to the SARM--a savvy move by the biotech and perhaps a first (let us know otherwise). BMS retains a right of first negotiation. Here's a link to the Pharmacopeia webcast announcement. Note: we are not calendar challenged--but we liked this deal and since Deals of the Week! didn't exist last week, we figured we'd include it here.
  
• Lilly/MacroGenics (10/18): Two anti-diabetes antibody deals of note: Lilly continues to solidify its stance in both the diabetes and biologics market with this deal for MacroGenics' late stage anti-CD3 antibody, teplizumab. Though the ultimate deal value could go north of $1 billion, it's back-end loaded; it cost Lilly just $41 million to get exclusive rights to the drug. The Baltimore Sun has the news. Bonus: GSK/Tolerx (10/23): GSK inked this deal with MacroGenics' competitor Tolerx just days later for the biotech's anti-CD3 mAB otelixizumab. For biologics-poor GSK, this deal looks like another toe-dip in the large molecule waters. Last December, the pharma bought next-generation antibody player Domantis and inked an expensive deal with Genmab for rights to its late-stage Humax-CD20 antibody.
  
• Janssen/Galapagos (10/24): Another back-ended loaded deal--the upfront was just 15 million euros though the deal value could eventually reach one billion euros. This time Janssen Pharmaceutica, a division of J&J, brokered a deal with Belgian-based Galapagos for small-molecule drugs to treat rheumatoid arthritis. Here's the link to Fierce Biotech's coverage.
  
• Inverness/Alere (10/24): Point-of-care diagnostic player Inverness has acquisition frenzy. On Wednesday the company announced it was buying another company, Alere Medical for $302 million. This move illustrates Inverness' continuiing diversification beyond cardiovascular diagnostics. You see, Alere isn't the typical acquisition fodder of a Dx company. The Nevada-outfit is really a device play with a nifty remote-monitoring system for patients with chronic diseases such as congestive heart failure.
  
• Wright Medical Group/Metasurg (10/22): Wright is paying $2.5 million upfront plus potential earn-outs based on sales for Metasurg's BIO-ARCH subtalar implant, which is used in surgical treatment of flatfoot deformity. This small bone deal is, well, small, but we flag it up as part of a trend: small bone is an unconsolidated, underserved segment of orthopedics that is beginning to show signs of life, consolidation-wise. Don't be caught flat-footed, readers. (Sorry.)

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How to Improve Drug Development? Fail Fast!

In this morning’s PSA panel on “Development Dilemmas and Opportunities,” Michael Clayman, MD, VP of Lilly Research Laboratories at Eli Lilly & Co., presented a unique option for optimizing clinical pipeline success. Perversely, it depends on failing fast. Clayman heads Lilly’s Chorus division, an organization that is trying to create a new model for drug development built on not reducing attrition but increasing the chances post-clinical proof of concept that a drug will make it to market. We took an in-depth look at Chorus in May in IN VIVO.

Clayman estimates that 90% of drugs in development will fail anyway, so why devote the time, the resources—the dollars—driving a product forward if it’s not going to make to market? The goal of his group: cut costs, and dramatically narrow the time to a decision point—typically proof of concept in man, what Clayman jokingly refered to today as “pull out your checkbook”—down to as little as twelve months.

It’s a goal Clayman claims Chorus is well on its way to achieving. To date, the company has shown that it can shave 12 to 18 months off the time it takes a drug to reach proof of concept and reduce the R&D dollar spend from $30 million to $3 million.

But, outside these metrics, there aren’t obvious ways to measure the group’s success. It’s not as if the company can use drug approvals as a measure, since the goal of Chorus isn’t to get drugs on the market, but to de-risk them as much as possible. Indeed, it’s an organizational tool to manage Lilly’s vast portfolio of drug products so that the bias is on the ultimate winners. And while nearly 80% of Lilly molecules might be pushed forward according to this program, to date the strategy has been applied to just 10.

According to Clayman, one critical component of the strategy is that Chorus is compound agnostic. No one on the 24-person team has a driving loyalty to a molecule that might sway him or her to push one project forward over another. The group also operates as an autonomous division within Lilly so that it is not hide-bound by the operational infrastructure of the larger organization. “Once a molecule is transferred to us, it’s no longer worked on by Lilly scientists. We outsource the experimentation,” he says.

That level of outsourcing is likely to be troubling to most other major pharmas. It seems unlikely that many outfits would be willing to adopt such a strategy unless there were significant proof that it improves R&D productivity. Until such time, expect the refrain to remain simply Lilly’s chorus.

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Who's Sorry Now? Big Pharma Edition

Sparked by today's apology by Bayer at its Trasylol FDA committee meeting, we thought it would be fun to round up a few recent mea culpae out there in pharmaland. I'm sure we've missed some, so let us know in the comments.

• Bayer to FDA Panel: Sorry we didn't let you in on the bad news in that big Trasylol study last year, but what's a little death, kidney damage, congestive heart failure, and stroke among friends? We hope you'll leave Trasylol on the market.


• Novartis to Shareholders: Sorry we haven't been buying back a ton of shares like every other Big Pharma company. We promise to do better in the future!


• Lilly Leaker to Lilly: Sorry I sent the New York Times all those juicy Zyprexa documents last year. I hope $100k covers the damage? PS I'm not really sorry.


• JAMA to GSK: Sorry we're piling on.
  

[Ed. note: As any of you out there who are sports and pharma blog readers may already know, we freely admit to stealing this gimmick from the sports blog par excellence Deadspin. Sorry.]

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While You Weren't Working

For those of you in the US, we hope you had a relaxing three-day weekend. Here are a few items you may have missed while sparing a thought for the Noble and Holy Order of the Knights of Labor and/or enjoying a cocktail. Not everyone took the weekend off ...

• Merck & Co said on Sunday at the European Society of Cardiology congress in Vienna that Cordaptive, it's extended-release Niacin plus flushing inhibitor, was effective at lowering LDL cholesterol while raising HDL. Reuters has the full story.
• The Observer takes a look at investor unrest at GlaxoSmithKline, and in particular institutions attempts to get their points across to the company's as-yet unchosen new CEO, who will take the reigns when JP Garnier retires in May 2008. You might recall the Telegraph running something along these lines back in May (and our comments at the time on succession speculation). We'll have more to say on this later in the week.
• The Philadelphia Inquirer weighs in on the state of drug marketing, and finds that drug samples and TV ads help drive uptake of medicines.
• Eli Lilly's new schizophrenia drug may offer safety and efficacy improvements over existing antipsychotics, according to results of a 200-patient Phase II trial. From Nature, via the New York Times.
• Acambis has received FDA approval of its ACAM2000 smallpox vaccine

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While You Were Watching the Weather Channel

Dean on the move

A few notes from the weekend that was. Yet again we've dipped into this morning's news, but it was a slow weekend unless you're an armchair meteorologist.

• Made in New Jersey. The NJ Star Ledger takes a look at Wyeth's Alzheimer's disease drug discovery and development programs (The NYT put Wyeth center stage for its own Alzheimer's feature back in June, which we pointed out here). (Hat tip, Pharmalot, where Ed points out that Wyeth's recent spate of troubles may be responsible for its proactive media push.)


• Made in China. Lilly announced early this morning a deal with Hutchison China Medtech, for multiple drug candidates in the oncology and inflammation areas sourced from Chi-Med's herbal medicine discovery platform. Chi-Med will get R&D support and upfront payments on each candidate, plus milestones ranging from $20-29 million per, plus royalties. The release arrived in our in-box at 7am BST, but it looks like the Telegraph had the scoop.


• Made in Heaven. Didja hear the one about Novartis buying Bayer? Pharmagossip helpfully illustrates some real world M&A difficulties.

Image: Reuters/NOAA

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Evista Update

Lilly's response to my questions about the Evista press release (subject of a July 25 post):

"Following the July 24 meeting of the Oncologic Drugs Advisory Committee (ODAC), Lilly issued a press release containing factual information about the meeting’s outcome pertaining to Lilly’s osteoporosis drug.

'We believe that our actions were consistent with the laws and the consent decree,' said Anne Nobles, Vice President, Compliance and Enterprise Risk Management. 'Lilly takes very seriously our responsibility to abide by all the laws governing our business practices and are committed to ensuring our employees' actions reflect the highest legal and ethical standards of conduct.'"

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Lilly’s Evista for Breast Cancer Prevention: Vindication or Provocation?

It looks like Eli Lilly & Co.’s raloxifene Evista is poised for approval for reduction of the risk of breast cancer. A Food & Drug Administration advisory committee voted yesterday to support use of the drug for that use in post-menopausal women at high risk of breast cancer, and—more narrowly—to support use for breast cancer prevention in post-menopausal women with osteoporosis.

The agency itself has until September to make a decision on Lilly’s pending supplemental FDA. But all signs point to an approval that, whatever else it means, will feel like vindication for Lilly.

Just 18 months ago, the company paid $36 million to settle an investigation into its promotion of Evista. The drug has been approved for use in osteoporosis for a decade. But in 2005 Lilly pled guilty to a criminal misdemeanor charge that it promoted the drug for breast cancer prevention and cardiovascular risk reduction. The conduct involved occurred in 1998; the company simultaneously settled related civil claims dealing with conduct that continued into 2000, but Lilly did not admit guilt.

In addition to paying the fine, Lilly entered into a consent decree prohibiting it from promoting Evista for breast cancer prevention without formal FDA approval.

Not that you would know that from reading Lilly’s press release announcing the advisory committee vote. Underneath a headline announcing the advisory committee vote, Lilly includes what starts out sounding like a disclaimer but ends up sounding like a claim of effectiveness for the new use: “EVISTA is currently indicated for the prevention and treatment of osteoporosis and may provide an important option for postmenopausal women at increased risk for breast cancer.”

Now that sentence is surely unobjectionable on its face. But it definitely counts as bold talk from a company that just signed a court order saying it is “permanently enjoined from directly or indirectly promoting Evista for use in preventing or reducing the risk of breast cancer…unless and until it is authorized to do so by the FDA by the approval of a supplement to the New Drug Application for Evista.”

Especially when you consider that the DoJ investigation included, among other allegations, claims that Lilly promoted the off-label use through its press releases about Evista. (Read the Justice Department’s summary of Lilly’s conduct here.)

Of course, the consent decree includes other provisions, notably one stating that “nothing in this Decree shall be construed to limit or expand the rights of Eli Lilly under the First Amendment of the Constitution.”

When it comes to off-label promotion, that is precisely the question: what are the rights of drug companies like Eli Lilly under the Constitution? Free speech advocates argue that companies have the right to engage in scientific discourse about their products, even if they are talking about uses not approved by FDA. After all, if raloxifene works to prevent breast cancer, millions of women would benefit from knowing that as soon as possible.

Prosecutors see it differently: the FD&C Act prohibits promotion of unapproved uses of drugs, and they have gone after many companies for promoting their drugs beyond the label. There have been several recent settlements (with the Evista case one of the first) in which manufacturers have accepted that premise—explicitly or implicitly—rather than fight the charges in court.

In our next issue, The RPM Report will be taking an in-depth look at the current state of uncertainty in industry after the recent wave of settlements.

As the advisory committee vote indicates, Lilly’s statement that Evista “may be an important option for post-menopausal women at increased risk for breast cancer” is undeniably true. But it was undeniably true a decade ago too. And that didn't keep Lilly out of trouble.

Now, here’s a thought: Johnson & Johnson made headlines recently when it offered a money back guarantee to the UK National Health Service on its cancer therapy Velcade, promising to pay back the government if the therapy doesn’t prove cost effective.

Maybe Eli Lilly & Co. should take a page from that playbook. But instead of offering a refund to the US government, maybe Lilly should ask for its money back from the Department of Justice. Justice.

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While You Were Dominating the Competition

If you were too busy playing in the Wimbledon semis and finals this weekend (or maybe just watching) to keep up with the news, IN VIVO Blog is here to help.

• Inhibition! Some news out of the International Society on Thrombosis and Haemostasis in Geneva this weekend. First up, Bayer's rivaroxaban was significantly more effective than Sanofi-aventis' Lovenox in preventing blood clots after knee surgery, Reuters reports. Rivaroxaban, a Factor Xa inhibitor, is being developed with Johnson & Johnson. Another Factor Xa inibhitor, Pfizer and BMS' apixiban (which is approximately a year behind rivaroxaban in development), also posted solid results, in a mid-stage trial. Reuters has the story.
  
• Indecision! UK's National Institute for Clinical Excellence (NICE) has changed its mind, and now considers Eli Lilly's Alimta cost-effective in treating mesothelioma in certain patients.


• Interference!! Roche and Alnylam announced this morning a broad alliance in RNAi therapeutics, worth up to $1 billion. Alnylam gets $331 million up-front in cash and equity payments. We hope you're not all RNAi'd out cause there'll be more on this later ...

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Talking of Sons-of-Drugs…

Just when we thought that drug companies had given up on some of their more blatant life-cycle management tricks, snubbed by stingy payors who now know their left-handed from their right-handed isomers, out come Sanofi-Aventis and UCB with news of US approval for their new anti-histamine Xyzal. The Wall Street Journal’s Health Blog was quick to make the link—which the companies’ press release somehow omitted—and proclaim Xyzal as son-of-Zyrtec, which, incidentally, will lose patent protection in September.

Not much new drug company behavior there, then. But WSJ’s timely outing of Son-of-Zyrtec reminded IN VIVO Blog of another, somewhat more unusual Son-of-Drug story that you might just have missed.

Remember Lilly’s problematic Xigris, whose market performance has been as disappointing as the pre-launch anticipation was sizzling? In case you don’t: Xigris came to market in 2001, the first ever treatment for severe sepsis, after years of top-notch protein science and engineering inside Lilly, with many hearts and minds at stake.

Xigris is a case study of, simplistically, how too much innovation can backfire (just as too little can, also). Particularly since Lilly appears (with that wonderful thing called hindsight) to have launched the drug in too broad a population, which led to the brand image being tarnished by cases of serious bleeding. Lilly ain’t giving up on Xigris—there's too much money under the bridge for that. It's busy seeking biomarkers to find out which patients can benefit most. “We’re in invest mode” on Xigris, sum up Lilly executives.

But—and here, belatedly, is the point—Lilly was (after some persuading) quite happy to part with son-of-Xigris, theoretically a better-designed molecule, for not very much money and no claw-back to speak of. The Big Pharma last month quietly licensed the Phase I candidate to a relatively unknown Canadian biotech called Cardiome. Unknown, perhaps, except for the fact that Cardiome's CMO is Chuck Fisher, the man behind Xigris’ development and approval at Lilly.

The deal is somewhat personal, in other words. It's Fisher’s chance to make good what, to put it frankly, went bad within Lilly. He had a job persuading his own board to agree to the deal, even though Cardiome paid just $20 million up front and up to $40 million in milestones (which don’t start until 2009) for all possible indications (and there could be dozens). It’s a risky, if relatively cheap, bet for Cardiome: the drug’s father has proved an expensive failure, and although Cardiome is testing Son-of-Xigris for cardiogenic shock in the first instance, that's still a tricky indication with no pre-clinical models.

Still, if Son-of-Xigris does make it to market one day, in anything, it will be interesting to compare its development and approval path within a small, focused biotech with that of its father, who was brought up in Big Pharma: nature vs nurture. As we’ll suggest in the next issue of IN VIVO, the Xigris family of drugs may just be better suited to biotech. Certainly Fisher reckons he can do a better job marketing Xigris’ offspring than Lilly could.

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A Boon for Byetta?

As doctors, patients and regulators rush to make sense of the recent NEJM study showing an increased risk of heart attack among patients taking GSK's Avandia, it looks like good news for Lilly's Byetta.

The GLP-1 analog--or 'smart drug', as Lilly execs like to call it, since it stimulates insulin secretion in a glucose-dependent way, reducing the risk of hypoglycemia--has already done pretty well since its launch in June 2005. It suffered a brief blip in sales when Merck's DPP-IV inhibitor Januvia arrived (since Januvia, although less effective, comes in pill form and Byetta is a twice-daily injection) but has since recovered. Sales will be about $700 million this year.

And things can only get better. "Both Januvia and Byetta will benefit from Avandia's problems, and as physicians see that Januvia isn't that great, they'll move to Byetta," David Kliff, publisher of Diabetic Investor, told the IN VIVO Blog.

Januvia seems safe--so far--but doesn't actually work that well, as we explained in a previous issue of IN VIVO. Byetta, on the other hand, not only is extremely effective at controlling blood sugar (it prevents sugar lows plus, because of its effect on glucagon, sugar highs) but also helps diabetic patients lose weight.

And that, frankly, is just perfect, since many diabetics are overweight, and since insulins tend to exacerbate that problem. So rather than being stuck on insulin, getting fatter and with poorly controlled blood sugar levels (only about a third of insulin users actually control their blood sugar effectively), patients "start a cycle of success," enthuses Lilly's global brand development leader for Byetta, David Vondle. "They have more energy, start feeling better, so they take a walk, and that helps with weight loss...and they're just more optimistic," he says.

Lilly's GLP-1 team probably feels pretty happy, too (unlike their cousins in the insulin department, who blew it). Not only has first-to-market Byetta brought a huge improvement to patients' lives, but there's an even bigger paradigm-shift on the way: a once weekly Byetta. "Every doctor is salivating for Byetta LAR," says Kliff.

They'll have to salivate until 2010, but it may be worth the wait: patients will be able to take just one weekly injection, rather than twice daily. That's 13 fewer injections per week.

That's a selling point if ever there was one. And, as with Avandia, where there's a winner, there's a loser. In the GLP-1 space, it might just be Novo Nordisk's human GLP-1 analog, liraglutide. It's due out a year or so before Byetta LAR, but Novo's not always the timeliest, and liraglutide is a once-daily. Read more in the next issue of IN VIVO.

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Lilly's Shadow Government

Senior Republican staff in Washington are beginning to look for good, safe places to go until the political winds change. One top Health & Human Services official has found that haven in Indianapolis where a number of Republicans have gone previously for respites during a period of Democratic control.

Eli Lilly’s recruitment of the former Deputy HHS secretary Alex Azar continues a long tradition at the firm of offering shadow government posts to well-placed Republican figures.

Azar: Indiana jonesin'

Going back to George H. W. Bush, Lilly has served as a temporary home and launching pad for loyal Republicans. The former President served a three-year tenure on the Lilly board after leaving his final Ford Administration post as CIA director.

Azar, who played a major role in putting his stamp on HHS policy from two subcabinet level positions (first as general counsel and then as deputy secretary) will be senior VP-corporate affairs and communications.

The senior VP corporate affairs position is the very job held for nine years during the 1990’s by the current Indiana Governor and former OMB director, Mitch Daniels. Prior to joining Lilly, Daniels was the political director for the Reagan White House.

All big pharma companies obviously play an active game of political influence and are on the lookout for knowledgeable and experienced Washington insiders, but Lilly’s approach is unique in its focus on an ideological fit. The company appears to be less pragmatic and more idealistic in its choices. Azar, who reportedly marked his departure from HHS with a poignant note about praying for advice on his future choice of careers, fits the mold of idealistic conservative that Lilly likes to groom for higher positions. And, with a president and OMB director to its credit already, the company has not done too badly.

For a company that publicly espouses disdain for government-controlled functions, Lilly has done well with government business. Its antipsychotic Zyprexa always appears among the top products purchased by the government; it was also one of the first products to benefit dramatically from the shift from Medicaid to Medicare in 2006. Medicaid programs were getting more effective at forcing down the price and purchases of the product.

Lilly also has had great access to Washington from Hoosier politicians that it has backed aggressively. During the Reagan Administration, for example, Otis Bowen, a former Indianan governor, headed HHS for three years. During the presidency of George H. W., the firm basked in an Executive Branch headed by a former board member and a former Indiana senator, Vice President Dan Quayle.

Lilly likes to point out that Azar has broad knowledge of a number of key government constituencies: the “agencies under his direction included, among others, the Food and Drug Administration, the Centers for Medicare and Medicaid Services, the National Institutes of Health, and the Centers for Disease Control and Prevention.” Perhaps, more importantly, Azar planted a series of aggressive general counsels throughout HHS. At FDA, for example, Azar worked with Dan Troy, a former colleague from private practice at Wiley, Rein & Fielding.

Bringing a political pro into the corporate structure can raise some practical issues. Lilly tried to move Daniels into a line operating position in charge of the US pharmaceutical business but quickly found that he was more valuable in government relations and policy. He could run the government budget and the state of Indiana but did not satisfy Lilly’s demands for running a drug company.

The Azar appointment, announced on May 4 three months after his departure from HHS, comes soon after one Lilly connection to Washington went sour. Former Lilly Chairman Randall Tobias recently resigned from an assistant secretary at the State Department in charge of US foreign assistance and USAID following inquiries about his participation in the Washington escort service scandal.

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A Sleeper of a Deal

Insomnia: more than just another solid film by British writer/director Christopher Nolan. The $4 billion market is one of Big Pharma's thriving primary care playgrounds, home to some of the industry's wackiest DTC ads and a handful of lucrative deals.

Days never end. Nightmares are real. No one is innocent.

Eli Lilly said yesterday it was acquiring the private insomnia-focused biotech Hypnion to help boost its CNS pipeline. Terms of the deal weren't disclosed but IN VIVO has learned the transaction was all-cash and included no earn-outs. While Nolan's 2002 film grossed nearly $114 million we reckon Hypnion probably sold for more than twice that figure, even without having the benefit of Al Pacino or quasi-exotic Alaska locations.

It's not surprising that Hypnion's backers sold out--insomnia is an increasingly competitive space to play in, with large, expensive Phase III development programs (like Somaxon's multiple pivotal trials for Silenor).

Hypnion opted to sell rather than license in the wake of decent Phase II data for its lead candidate, HY10275, which were announced in January. HY10275 is a dual histamine/serotonin (H1/5HT2a) receptor modulator, a mechanism that may allow the drug to avoid scheduling by the FDA/DEA as a controlled substance. Currently marketed drugs, with the notable exception of Takeda's Rozerem (a melatonin receptor modulator) block the GABA-A receptor and according to regulators are potentially abusable.

The vast majority of the company's value was tied up in that compound and its backups & while the company's private investors have supported the company well thus far--it has raised nearly $90 million since inception in 2000--Hypnion was largely a binary bet. Licensing HY10275 would have left little for future public investors to chew on.

Lilly's been active in insomnia R&D at least since it licensed in pruvanserin from Merck KGAA in 2004. Pruvanserin, a serotonin receptor antagonist, is also in Phase II.

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