Regulatory Sausage Making

The old adage comparing the unattractiveness of political decision-making with sausage making may apply to Food & Drug Administration drug approval decisions in the future.

If Iowa Senator Chuck Grassley has his way, every FDA drug advisory committee may soon replicate the Avandia debate from last summer -- when the head of the new drug review office in charge of the original Avandia approval debated the head of FDA's drug safety office in an open airing of differing opinions from within the agency. My colleague Ramsey Baghdadi wrote compelling about the drama at the Avandia meeting last summer. (Click here to read the story.)

In the most recent version of what has become an annual year-end epistle to FDA on the agency's handling of the approval of Sanofi-Aventis' antibiotic Ketek (telithromycin), Grassley demands that FDA start bringing the wide range of different staff opinions on new drug applications out in the open for the advisory committee and the public to hear.

Until recently, FDA has tried to present its advisory committees with consensus positions on drug applications and scientific issues in the applications. But after investigating Ketek, Grassley finds that approach too glossy and a way to avoid public oversight of tough scientific decisions.

The Avandia meeting should be the new model. Grassley prodded FDA to adopt the same format where “FDA reviewers were allowed to express their professional opinions and recommendations regarding those drugs.” In case FDA missed the gist of his message, the senator repeated: “It is important not only that advisory committees be provided with complete and accurate data but also any differing scientific opinions and/or assessments regarding the data from FDA reviewers.”

And NDA sponsors should watch how FDA responds to Grassley's pressure. If he succeeds in opening up the FDA advisory committees to more disputes between FDA staff, he could well bring the all the blood and guts of an Iowa sausage factory to the drug review process. (See TheRPMReport.com for more coverage of the prospects, implications and background on more open debates at FDA advisory committees.)

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Deals of the Week: New Year's Resolutions

It's day four of the New Year and you've already broken that resolution to exercise, eat better, or spend more time with the family. Hey, it's okay. Those are tough ones to keep.

So how about an easy one: tune in every Friday for a run-down of the week's most interesting biopharma deals. It's a quick, easy way to stay on top of the industry's events, leaving more time for the kiddos or the gym, or your blackberry.

Once again, we bring you:

(Aren't you glad we aren't on strike?)

Admittedly, deal-making activity has been lighter than usual this past week. We surmise that's because execs are shining their shoes, amassing their business cards, and honing their laser pointer skills in preparation for the biotech's annual coming out party, aka the JPM conference. (The burning questions: 1. Can a company's success be correlated to its executives' neckwear preferences? 2. What color will the famous tote bag be this year?)

Sepracor/Bial: Specialty pharma Sepracor inked a much-needed licensing deal with Bial on Wednesday for the Portunguese drug maker's Phase III anti-epileptic compound BIA 2-093. (Naturally enough for Sepracor, the drug is an enantiomer, (S)-licarbazepine, a metabolite of an analogue of the off-patent anti-convulsant carbamazepine.) Last year the company lost the bidding war for Kos Pharmaceuticals to Abbott Labs and analysts began raising questions about the company's pipeline beyond its insomnia drug Lunesta. (For more, read here.) Under the terms of the agreement, Sepracor will pay Bial a $75 million up-front fee, plus an additional $100 million in development and regulatory milestones for rights to the compound in the US and Canada. In addition, Sepracor will also file the compound's new drug application with the FDA, which should occur late this year or early in 2009. "Strategically, BIA 2-093 further strengthens our existing central nervous system portfolio, which includes Lunesta for the treatment of insomnia, as well as earlier-stage candidates for various central nervous system disorders," said Adrian Adams, President and Chief Executive Officer of Sepracor in a company press release.

Merck/Addex: In terms of "biobucks", the Merck/ Addex agreement was the week's biggest splash. As we wrote yesterday, the two companies announced an exclusive licensing agreement centered around the Swiss biotech's ADX63365, an allosteric modulator currently in preclinical development for schizophrenia and other undisclosed indications. The deal terms are potentially rich: Addex could see up to $680 million in downstream development, regulatory, and sales milestones, but that would require an unlikely alignment of the R&D planets. Guaranteed money was not quite as generous, but the solid upfront of $22 million for a non-clinical compound does suggest Merck is taking the idea of allosteric modulation seriously, and is roughly an order of magnitude greater than the company's previous discovery deals ... so who knows what a deal around its lead Phase IIb candidate might look like (you'll have to wait til next year to find out). For more on Addex and allosteric modulators check out this profile of the company from the January 2006 START-UP.

Sanofi-Aventis/IDM Pharma: Bad news for IDM Pharma this week. On Monday, the company learned that its partner since 2002, Sanofi-Aventis, would no longer help develop its dendritic cancer vaccine, Uvidem, which is currently being tested as a melanoma treatment. No reason was given for the move, but cancer vaccines have had a tough go in recent months, especially after the FDA required one of the field's leading lights, Dendreon, to submit additional efficacy data for the approval of its immunotherapy Provenge. IDM noted in a release that it will continue to evaluate the Uvidem clinical program, which recently completed Phase II trials "with promising results." But already, restructuring plans are in the works, involving "staff reductions in the Company's workforce and a review of the assets and costs associated with products under development." The news comes just weeks after the biotech issued a press release with updated news about its pipeline and a promise to investigate "strategic alternatives."

Sanofi Pasteur/Crucell: On Thursday, Dutch antibody maker Crucell and Sanofi Pasteur, the vaccines division of Sanofi Aventis, announced they were teaming up to develop next-generation rabies biologicals to be used in association with a vaccine for post-exposure treatment against this fatal disease. Under the terms of the agreement, Sanofi will pay Crucell 10 million euros following the deal's execution; Crucell could receive an additional 66.5 million euros in milestones as well as an undisclosed percentage on sales of the final product if the rabies antibodies pan out. To date, Crucell has developed a combination of two rabies mABs that are well tolerated and provide immediate neutralizing activity in Phase I clinical trials. Crucell expects to enter Phase II clinical trials in the first half of this year. If approved, peak sales of the rabies antibody cocktail could exceed $300 million.

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Another Dismal Year for New Drug Approvals

When does a drought stop being a drought, and just become a desert?

That question has to be raised when contemplating yet another disappointing year for innovative pharmaceutical launches in the US.

FDA approved just 17 new molecular entities in 2007—the lowest single year total since 1983, when there were 14 NME approvals.

FDA’s official tally will probably be 19, including two therapeutic biologics approved by the Center for Drug Evaluation & Research. FDA began including biologics in its total in 2004, so that makes historical comparisons difficult. But even if you count all 19, this was still the worst year since 1983.

That’s 25 years ago, folks. Gandhi won best picture. Toto won album of the year. A Philadelphia sports team actually won a championship.

If you want to understand the decline in productivity industry wide, consider this: total R&D spending by brand-name companies in 1983 was $3.2 billion, compared to $43 billion in 2007. In other words, the industry spent $228 million per NME approved in 1983, compared to $2.5billion each in 2007. Or, if you prefer, the extra $40 billion in R&D spending brought with it a total of five additional therapies.

Big Pharma didn’t have anywhere near as many mouths to feed in 1983 either. The entire domestic brand business was just under $17 billion, according to data reported by the Pharmaceutical Research & Manufacturers of America trade association. Domestic sales of brand companies today are ten times higher. (If you haven’t read Roger Longman’s post yesterday about the importance of adjusting industry infrastructures, please do so now.)

Of course, looking at any single year doesn’t tell you anything about the overall health of the new product flow in the industry. Pharmaceuticals do have a relatively long commercial life, so as long as there is a health bolus of new products every few years, things should be fine.

Unfortunately, looking across multiple years doesn’t make the picture any brighter. Last year was the worst for new product launches since 1983. The second worst? 2005. Third worst? 2006. Fourth? 2002. In fact, FDA has approved more than 30 novel molecules only once this decade, when it cleared 36 in 2004. FDA approved more than 30 every year in the second half of the 1990s.

Or consider this: over the past three years, FDA has approved a total of 61 new molecular entities and novel biologics. The agency approved 60 in 1996 alone.

We like to track our own statistic, Innovative Commercial Therapies. That represents our attempt to measure the number of truly novel molecules (no enantiomers, metabolites or pro-drugs, where the basic question—is it safe and effective in humans?—has already been answered; no diagnostics; and no non-commercial products like biodefense agents developed by the Department of Defense.)

We think that gives a more accurate indication of the real output of big pharma and biotech pipelines. That only makes the picture that much grimmer: there were just 14 ICTs in 2007. Below are the statistics over the past decade.

If you divide that chart in half, you can see that FDA approved a total of 199 ICTs in the six years from 1996 through 2001. That compares to just 122 in the six years from 2002 through 2007, a decline of 39%.

Okay, enough gloom and doom. Looking on the bright side, at least there were fewer first time generic launches in 2007 than there were new molecular entity approvals. As we reported last year, for the first time in memory the industry suffered a net loss of patented medicines in 2006.

Of course, it was a close race. By our count, there were 14 first time generic launches in 2007, balanced against the 16 NMEs. And boy is it hard to imagine the crop of new drugs launched in 2007 matching the commercial peaks of the brands that lost exclusivity—products Norvasc, Ambien, Lamisil, Coreg, and Protonix.

And, since the industry suffered a net loss of two patented molecules in 2006, that means that the entire pharmaceutical industry has only stayed even in the number of patented medicines on the market for the past two years. That, to put it mildly, is not a recipe for sustained growth in the industry in the years ahead.

Bear in mind that, not only is the absolute number of new product approvals declining, so is the likely peak market size for new products. In other words, at a time when the industry desperately needs the pipeline to pump out more new products than ever, it is getting only a trickle.

Something needs to change.

Please Note: This post has been updated.

Our initial count of drug approvals in the IN VIVO Blog was off by one. It turns out there were 17 new molecular entity approvals, not 16—Fresenius Kabi’s hypovolemia agent Voluven (hydroxyethyl starch) was approved December 27.

Voluven was approved under the 505(b)(2) mechanism as equivalent to other blood volume enhancers, so it definitely does not add to our benchmark statistics (innovative commercial therapies, or ICTs). The extra NME also doesn’t change anything else in our analysis: 17 NMEs is still the lowest total since 1983, as is 19 novel molecules (NMEs plus novel biologics). Voluven is nevertheless an interesting approval: it is the latest example of the emerging follow-on biologics pathway at FDA.

What’s that? You think there is no such pathway? Not so. Congress has yet to enact a legislative pathway for follow-on versions of biologics regulated under the Public Health Service Act. But for biologics that happen to be regulated under the FD&C Act (like human growth hormone, insulin, insulin-like growth factor, etc. etc.) follow-on approvals keep trickling out of the agency. Look for more on that topic as well, coming soon in The RPM Report.

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Addex Ups Dealmaking Ante

Addex Pharma today took a step up the dealmaking ladder, partnering its pre-IND positive allosteric modulator ADX63365 and back-up compounds with Merck & Co. for $22 million upfront plus milestones and royalties. Addex can also opt to co-promote resulting products in certain EU countries.

63365 targets the metabotropic glutamate receptor 5 (mGluR5), which Addex says has shown antipsychotic properties improvement of cognitive dysfunction in preclinical studies.

The worldwide exclusive license deal comes on the heels of the two companies' $3 mllion up-front December pact, a discovery deal around positive allosteric modulation of a related receptor, mGluR4, which could lead to products to treat Parkinson's and other diseases. Addex inked an earlier discovery deal in 2005 with Johnson & Johnson around positive allosteric modulators of mGluR2.

Addex's allosteric modulators bind to sites on drug targets that are distinct from the target's active site, where endogenous ligands or conventional drugs bind, offering a variety of potential advantages. Positive allosteric modulators (PAMs) can potentiate the effects of endogenous ligands or conventional drugs, while negative allosteric modulators (NAMs), such as Addex's lead compound ADX10059, can dampen the effects of endogenous ligands (see above).

Enthusiasm for today's deal may be tempered a bit with news that ADX10059 did not reduce acute anticipatory anxiety in a small Phase IIa study in patients with dental anxiety, also announced this morning. Addex has previously reported successful Phase IIa results for 10059 in GERD and migraine, however, and the biotech aims to partner the candidate post-Phase IIb.

Ladder photo from Mayhem & Chaos Photo Blog used under creative commons license

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Congress Has Lump of Coal for FDA in Funding Bill

Congress finished some important work before leaving town for the holidays, finally enacting new funding legislation for the federal government for fiscal 2008. The bill, signed by President Bush December 26, is critical for the Food & Drug Administration, because it allows the agency to start using the new, higher user fees it was authorized to collect by the drug safety law signed in September.

That means the agency can continue its full-steam ahead approach to implementing the user fee provisions of the FDA Amendments Act—the one piece of the legislation that both FDA and industry share unreserved enthusiasm for.

But the new funding comes with a big hitch: a provision stipulating that FDA cannot transfer any money to its other initial priority in implementing the law: the new Reagan-Udall Foundation, a public-private partnership that is supposed to help FDA develop new scientific tools to enhance its regulatory mission.

That may not sound like much to worry about. The new foundation is broadly supported by industry, which welcomes any opportunity to advance drug development science—but it seems like an afterthought in the context of the big changes in FDA’s regulatory authority over drug safety that are the centerpiece of the new law.

There are, however, very significant implications to the dispute, which could ultimately be critical to determining what role industry will have in the development of a new active surveillance system for pharmaceuticals.

Representative Rosa DeLauro, who chairs the House Agriculture Appropriations Subcommittee that oversees FDA, is concerned that the foundation may be an avenue for the pharmaceutical industry to exert more influence over the agency. She registered her concerns in a letter to FDA November 1.

FDA didn’t help the situation when it selected the board members for the foundation. The agency chose a very distinguished group to oversee the foundation, including former GlaxoSmithKline R&D President Tachi Yamada, who now heads the Gates Foundation’s global health program. On paper, Yamada is a perfect choice—his industry R&D background and current philanthropic position are hard to beat when considering the type of people who should oversee the foundation.

But the timing of the choice was disastrous. FDA announced the board selections on November 15—the same day that the Senate Finance Committee released a report on its investigation of claims that GSK intimidated an academic researcher who questioned the safety profile of Avandia. The report reviews a number of communications between GSK and the researcher, including emails from Yamada, and concludes that “the documents in the Committee’s possession raise serious concerns about the culture of leadership at GSK.”

Given DeLauro’s position that the foundation is an avenue to give industry undue influence over FDA, that made the selection of Yamada seem like a blunder.

Industry should hope that cooler heads prevail, and that DeLauro’s concerns can be assuaged. The Reagan-Udall Foundation should be a positive for drug development, and so pharma wants it to get off the ground.

But it is also the most viable short-cut to getting moving on a new active surveillance system for pharmaceuticals. The new law directs FDA to set up a public-private partnership to help build the database and develop the tools for analyzing signals to make regulatory decisions. The agency is leaning towards giving that mission to the new foundation—McClellan was one of the champions of including the provision in the FDA law in the first place.

Putting the new foundation in charge of developing the active surveillance system would address industry’s biggest concern with the project—whether product sponsors will have an appropriate role in shaping the new system.

That’s where things get really tough. DeLauro is already concerned about industry influence in the foundation. And Chuck Grassley, the ranking Republican on the Senate Finance Committee who oversaw the Avandia report, wants to play a role in shaping how the active surveillance project develops—at least to the extent it involves Medicare claims data. And Grassley’s view is that industry should have no role in analyzing that data.

So the fight over Reagan-Udall is probably just beginning. For industry the stakes may be higher than they seem.

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New Year's Resolution 2008: Create Infrastructure Strategy

It’s January 2 and so, in case you haven’t already settled on your New Year’s resolutions, we’d like to suggest one: figure out your infrastructure strategy.
A good place to start is with the number of people you need to do the job you’re in business to do. Since you will always have failures, you need a minimum number of programs to achieve a minimum level of return. Once you’ve figured that out, staff to that number of programs.

The problem is determining when a program achieves its minimum level of success. To answer that question, we’d ask another: for what are you looking to get paid?

As it stands today, companies can get paid -- pretty well, too – for doing a variety of jobs: creating INDs, for example (like Plexxikon); or getting a compound through proof-of-concept (like Exelixis or Vertex); or taking a product from Phase II to approval (like New River). It is by no means always necessary to do all of these jobs -- and therefore no need to staff them.

Think about the drug business like professional sports: the same guys who play in the NBA aren’t ever likely to qualify for Wimbledon; and none of them are likely to end up playing for the New England Patriots or worrying Tiger Woods. The physical requirements are different from sport to sport. And where they’re not, the training and focus required to perform at a high level in any one sport usually precludes excelling simultaneously at another.

The real question is to figure out what game you’re playing – and which team you need to play it. Presumably, you’ll need different players for the IND game than if you play the Phase III game. And you’ll need different numbers of players for each game.

Most Big Pharmas, thanks to tradition, feel they need to play all the games and therefore staff themselves to compete in each. But in fact they have traditionally played only one game – the commercial game. The only way a Big Pharma wins is by launching a product successfully (remember: what you get paid for doing determines which game you’re playing).

In terms of infrastructure, therefore, Big Pharma is playing at a huge disadvantage. The math goes something like this: to get one discovery compound to Phase I, you need to start with about eleven programs – and by the time you’ve gotten your one successful compound into Phase I, you’ll have spent $23 million in cash, without adding any capital or opportunity costs. (See a more in-depth analysis here). Infrastructure: 50-75 people.

On the other hand, to be relatively sure that you’ll get one discovery program all the way to market, you probably need to start with more than 100 programs – or a discovery cash outlay of more than $200 million. Rough estimate: 500 – 750 people. That math works, incidentally, only if discovery infrastructure is scaleable – that is, if ten times the people can actually do ten times the work. Given discovery’s requirements for rapid feedback and a certain anti-bureaucratic creativity, it seems more likely that at some point, the larger the discovery organization, the less productive it is.

In any event, in the worst case, if you’re making your money at Phase I, you need just one-tenth the discovery infrastructure you need if you’re not getting paid until a product reaches the market.

Same logic with development. If you’re getting well paid by a licensee or acquirer for moving a compound from Phase I to Phase III – not from Phase I to the market – you need fewer compounds to succeed because you don’t have any FDA or launch risk in your business. Fewer compounds, fewer employees. Nor do you need the same kind of infrastructure our discovery-focused player required. You need a different kind of infrastructure for finding new compounds to develop.

For this logic to work, you need to get paid, on a relative basis, about as well for doing a more focused job as for doing the traditional soup-to-nuts work of the traditional Big Pharma. And in fact you can. Phase II compounds now generate upfront licensing fees of $70 million and up – with royalties in the high teens or higher (and there is an increasingly competitive marketplace of companies willing to buy out those royalties, in case you want your returns right away). Domain Associates has done well for itself in-licensing a Phase I compound or two, wrapping a company around it, and hiring no more than a dozen people to manage the compounds’ development, largely through a network of CROs – then selling off the result at huge profits to J&J (Peninsula), or Forest Laboratories (Cerexa), or Merck (NovaCardia).

You can argue how repeatable those models are and therefore how much additional infrastructure you might ultimately need. Celtic Therapeutics – the new follow-on private equity fund building on PE predecessor Celtic Pharma (see here and here, for more) – figures that Domain’s math of onesies and twosies won’t work consistently. Given standard clinical failure rates, Celtic is thus amassing a larger portfolio of projects for which they’ll need a larger number of managers. But because Celtic is focusing only on later-stage development, it will still only need a relative handful of workers (20 projects = about 65 people, says Celtic managing director Stephen Evans-Freke).

We admit that we are oversimplifying the infrastructure debate to make a point. There will be companies who do multiple jobs and will require multiple infrastructures. A Big Pharma might be able to get paid for Phase I to Phase II primary-care development (e.g., Bristol-Myers Squibb’s deals with AstraZeneca and Pfizer) and simultaneously get paid for launching new specialty medicines… or vice-versa. There will be Big Pharmas who can create INDs and get paid – in cash or kind – for distributing them to development partners (Lilly is doing something like this with its Nicholas Piramal relationship).

But the key will be figuring out which jobs you can consistently get paid for. And then to stop doing the jobs – and thus hanging on to the related infrastructures –you’re not getting paid for.

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The Top Ten IN VIVO Blog Posts of 2007

IN VIVO Blog started up in earnest about eight months ago, and in that time we've racked up hundreds of posts covering a wide variety of topics, like Big Pharma's pipeline troubles, biotech exit strategies, financing, drug regulation, managment succession, and the Philadelphia sports scene. But, you're wondering, what are our favorites? Well, reader, wait no longer. Because to jumpstart your workayear life we've completely unscientifically collected our Top Ten posts of 2007.

You'll notice that there are well more than ten posts below, but we've handily crammed them into a list of ten topics. It's our way of saying "Happy New Year!" or maybe "We can't count!"

10. The Importance of China: we spoke to VCs eager to invest there, we covered a few harbingeresque deals, and we analyzed the country's role as a gene therapy hotspot.

9. RNAi: We broke the news about the next-generation RNA interference company Dicerna, and followed up with news of its Series A & new competition from Nastech spin-out MDRNA. We also covered Alnylam's spectacular platform deal with Roche and AZ/Silence's smaller but important-to-the-biotech alliance.

8. Inhale, Exhale: We had a little fun with Pfizer's inhaled insulin Exubera troubles, like much of the rest of the blogs out there, and we also came through with some more serious content: the Gecko-esque play by Sanofi-Aventis, the ads that couldn't make enough people "get it," and an early look at the numbers that led to the drug's demise. Finally we unpacked some taken-out-of-context quotes that created just one of the several stories this year involving ADA president John Buse, MD.

7. Win Some, Lose Some: Carl Icahn succeeded in getting MedImmune on the block and sold to AZ for a handsome price. But his plans to put Biogen Idec on the block (see more below, in #1) and interest in Genzyme failed to achieve the desired M&A result, so far.

6. Diagnosis Negative: Icahn wasn't the only party rebuffed. Roche spent most of the year getting turned down by Ventana, which played down the pharma's $3 billion offer multiple times. First they said please, then highlighted its belief in the importance of its diagnostics business by promoting its dx head Severin Schwann to CEO of the whole Roche Group. We suggested soon thereafter that Ventana should do the deal, and in late November they indeed decided to at least think harder about it.

5. R&D: As the attempted revitalization of Big Pharma's R&D machines continues we observed that it is business development effectively displacing much of the research infrastructure and decisionmaking, for example at Johnson & Johnson, where that company's drug business has made its chief licensing honcho Tom Heyman head of discovery for the biggest R&D operation in its newly reorganized three-headed drug business. We also predicted, successfully, who might take over as Pfizer's R&D chief, and who the drugmaker could have considered instead.

4. Isn't that Special? We've observed several times the stretching and misappropriating of the label "specialty pharma," and in this post spelled out why many of these would-be specialists might be barking up the wrong tree.

3. Capital Connections: IN VIVO Blog would be less informative and well rounded without our colleagues from The RPM Report, who've written some brilliant posts regarding regulation and policy (not to mention biotech CEO entourages). Lets start with FDA and CMS teaming up against erythropoietin marketers J&J and Amgen, and our series of posts on the subject. And then there's our coverage of the Avandia situation, FDA's leadership, and drug safety.

2. Birth of a Hybrid: Bristol-Myers Squibb's innovative dealmaking this year drew our attention in a handful of posts analyzing the company's business model and dealmaking strategy. First it partnered two late-stage diabetes drugs with AZ, and followed up quickly with a monster deal with Pfizer on its anticoagulant candidate apixaban. Not quite a biotech, not quite a Big Pharma. As we discussed at our PSA conference in September, welcome to the hybrid future.

1. Biogen Idec: Shortly after we broke the news that Biogen Idec was retaining bankers to explore a potential sale of the company, we noted why such a sale, at the company's inflated valuation, wouldn't (or shouldn't) happen.

We look forward to the new year & hope you'll stay tuned. Thanks for reading.

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