Deals of the Week: Winter of Our Discontent

Seems like many folks in pharma land are channeling Richard the Third this week. (Alas, there is no son of York to make winter's discontent glorious summer.)

Certainly staffers at both AstraZeneca and Sanofi-Aventis are less than happy: both companies announced more job cuts this week. (AZ will lay-off some 300 R&D employees from its Alderly Park site while Sanofi plans to reduce its German sales staff by 380.) And, pity the poor VCs. The Star Ledger is reporting that VCs are accepting smaller returns on smaller deals and waiting longer to cash-out as a result of the global credit crunch and the flagging IPO market.

Finally, remember Trimeris? Back in December that company put its R&D activities on hold to review its strategic options. But management isn't moving fast enough for the company's largest shareholder, HealthCor. On Feb. 1, HealthCor officials wrote a letter to Trimeris executives asking for two board seats, stating: "We are not in favor of strategic transactions other than those involving a sale of the business." (Hmm. Maybe the HealthCor folks are actually channeling Carl Icahn...)

If you, too, are suffering the winter blues, fear not. The IN VIVO Blog has a cure. (WARNING: Side-effects may include motivational deficiency disorder, sudden on-set of snarkiness syndrome (SOSS), maniacal laughter, and IN VIVO Blog addiction. Hey, there are worse things...) You guessed it. It's that time again.

• Dynogen/Apex Bioventures Acquisition Corp.: On Wednesday, Dynogen and Apex Bioventures announced they have signed a definitive agreement that will allow Dynogen to become public through a merger with one of Apex Bioventure's subsidiaries. (In case you don't know, Apex Bioventures is a special purpose acquisition company--or SPAC--that raises money for the sole purpose of buying another entity. The key thing is the SPAC can't say whom its acquiring--or even considering acquiring--before it raises the money. SPACs have enjoyed a resurgence in popularity in the life sciences in recent years as an alternative to the IPO market or a reverse merger.) The move gives Dynogen plenty of cash--the press release says the company should have up to $65 million at the deal's closing. Dynogen will certainly need it. It's currently developing two Phase II-stage drugs for gastrointestinal disorders, including irritable bowel syndrome. And given pharma's own R&D heartburn in the space, Dynogen may need the additional data before a partner with deep-pockets will assume some of the development risk. In the past, SPACs have favored companies with a shorter runway to commercialization like Alsius and Precision Therapeutics so this combination will be interesting to watch.
  
• Amgen/Takeda: Hit by declining sales of its EPO franchise and growing competition, Amgen announced a monster two-part deal with Takeda this week. In Part I, Takeda gets Japanese rights to 12 of Amgen's pipeline assets in exchange for $200 million up-front, up to $340 million in development costs, and potentially $363 million in sales-linked milestones and royalties. The Japanese firm will also buy Amgen’s Japanese subsidiary for an undisclosed sum. In Part II, Takeda takes on worldwide rights to Phase III motesanib, a small molecule angiogenesis inhibitor for cancer, for another $100 million up-front and $175 million in additional success-based milestones. The deal embodies two major trends we’ve talked about: the need to cut unnecessary infrastructure and the importance of risk-sharing in the vein of Bristol-Myers Squibb's deals with AstraZeneca and Pfizer. (For a more in-depth look at the deal, see here and here.)
  
• GE Healthcare/ Whatman: On Monday, GE Healthcare announced it was buying Whatman, a global supplier of filtration products and technologies for approximately $713 million. That's a lot of money for a research tools business, even if Whatman posted 2007 revenues of more than $225 million. Still it's a far cry from the $8 billion GE planned to plunk down for Abbott's point-of-care and diagnostics businesses, a deal that was eventually scuppered. It's likely GE has realized it must resort to a serial acquisition strategy if it's to challenge Siemens for the title of global leader in IVD. And Whatman's filtration and sample prep technologies could play a key role in building better protein and DNA-based tests, an area in which GE is interested in bulking up. Meanwhile, we continue to ponder the fundamental connections between tool and test companies, something we wrote about here.
  
• GlaxoSmithKline/ Amira: Also on Monday, GSK and Amira teamed up to develop Amira's 5-lipoxygenase activating protein (FLAP) inhibitors in a deal that could be worth up to $425 million for the biotech. (But only if it meets all potential development and regulatory milestones. Makes you wonder what the up-front payment was, doesn't it?) Most of the flap...sorry, we couldn't resist...is about Amira's lead product, AM103, a once-daily, non-steroidal asthma treatment that just completed Phase I trials in November. This isn't the first monster deal Amira has inked. Back in 2006 it signed a deal with Roche worth up to $287 million to develop three anti-inflammatory candidates.

"West," by Flickr user Dreamer7112, used under a creative commons license.

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Beijing Boost for Japanese Encephalitis Vaccine

China has been preparing feverishly for the Beijing Olympics for years to showcase its new world position and economic power.


China's cool new National Swim Center

At the same time, there’s an interesting product development race in the vaccine field that relates directly to the safety of increased travel to Asia from the West. After a long ten-year effort, the race to develop a new Japanese encephalitis virus vaccine is into its final stretch.

Vienna, Austria-based Intercell AG has a BLA (biologics) application pending at FDA for a new inactivated JEV vaccine. Intercell filed its application with FDA at the end of December,
within weeks after filing for a similar marketing authorization application in Europe.

The vaccine, developed over a decade in conjunction with the Walter Reed Army Institute of Research, will be marketed and distributed for Intercell in the US by Novartis. Intercell will manufacture the tissue culture based product in Scotland. The vaccine (IC51) is the Intercell’s leading product candidate.

A preliminary discussion of the vaccine will take place at the Centers for Disease Control and Prevention’s Advisory Committee on Immunization Practices (ACIP) meeting on Feb. 27-28.

The chairman of the ACIP committee, Dale Morse, MD, Director of the Office of Science and Public Health at the New York State Department of Health, said that the discussion of the JEV vaccine will be one of the interesting topics for the upcoming meeting. Morse told the Feb. 6 meeting of the National Vaccine Advisory Committee that “the current vaccine is in limited supply” and “there may be increased demand around the Olympics for that vaccine.” The US Army has noted the shortage of the current vaccine from Biken due to a halt in production.

Intercell acknowledges that it would take an unusually rapid review of the product by the FDA to have it available for the Olympics in late summer. A spokesperson for Intercell, Lucia Malfent, says: “We do expect licensure for our product in 2008 but most likely the full process of market authorization will not be completed before the Olympics. Therefore, the vaccine will not be available in time for travelers to the summer Olympics in Beijing.” JE vaccinations are not routinely recommended for travelers to Chinese urban areas; the mosquito borne disease is more prevlaent in rural areas.

Intercell IC51 is not on the agenda for FDA’s next Vaccines and Related Biological Products Advisory Committee Meeting (Feb. 20-21). There is one tentative date for VRBPAC in late may before the summer Olympics. The product review for the February VRBPAC meeting is GlaxoSmithKline’s Rotarix (rotavirus vaccine).

Acambis is also working on a JE vaccine, ChimeriVax-JE. The company reported results from Phase III safety and efficacy trials in the first quarter of 2007. Acambis has not reported filing an application for marketing yet.

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Carl Icahn vs. Evil Corporate Governance

Don’t get us wrong. We think corporate governance, as a general, rule, stinks. We never understood how Pfizer could have gotten itself into the position of paying Hank McKinnell $180 million in retirement benefits – the man who presided over the deletion of tens of billions in the company’s market value.

Or, in an act of proportionately greater idiocy, how the board of Cell Therapeutics, that reliably subpar performer, could in 2006 pay its CEO James Bianco some $1.1 million in cash (and a ton of underperforming stock) along with, among other perks, $220,000 in the use of chartered aircraft.

Chancellor, Sith School of Corporate Governance

The charters must have been some compensation for the loss of Air Cell Therapeutics (the corporate jet) – which the board, in a short-lived fit of financial responsibility – sold at the end of 2005.

So philosophically we’re on board with Carl Icahn’s idea of taking lax corporate governance to task in his new blog (http://icahnreport.com/), still post-less as of this morning. "I may do something to finally focus on more than making money," Icahn told Dow Jones.

We’re sure Carl gives generously to all sorts of charitable organizations (there are, after all, the Carl C. Icahn Foundation and The Icahn Charitable Foundation). But forgive us for a certain skepticism re. icahnreport. Oh, we’re sure those widows and orphans will benefit as board members get religion and really start corporately governing. And we’re also sure that when they do, our economy will just pull itself up by its bootstraps instead of whining for more bailouts.

But we also figure that the more Carl can whip up support for board-bashing, the more likely he’ll be to get additional board seats at Biogen Idec. Then, with that malign group finally paying attention to the shareholders, they'll finally force the deal to allow Carl to off-load his Biogen shares.

He bought them, remember, figuring that Big Pharmas had such poor corporate governance that they'd be begging like dogs at the Thanksgiving table to overpay for an acquisition. (For our take on that ongoing affair, see here and here).

They didn’t? Hmm. Maybe there is some real corporate governance out there after all.

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FDA’s Search for a Drug Chief Not Going Well: An Internal Candidate Emerges

We know all of you have been passing the time following the Presidential Primaries when the race you’re really interested in is who the next head of FDA’s drug center will be, right? Right.

A number of agency watchers and former officials agree that the longer the search goes on, the more likely FDA will be forced to look inside for a replacement. We talked to one former high-ranking FDA official with some knowledge of the search and here are some of the things we found out.

First, FDA Commissioner Andrew von Eschenbach is “concerned” that the recruitment for a director of the agency’s Center for Drug Evaluation & Research is taking so long and “not looking fruitful.” FDA chief medical officer Janet Woodcock is temporarily overseeing the center’s day-to-day operations until a permanent replacement is named. The absence of a CDER director has been magnified by the vacant director position at the Center for Food Safety and Applied Nutrition.

“He didn’t want the two largest centers without permanent leaders for a long time,” the former official says.

That’s why von Eschenbach made filling the CFSAN vacancy a priority. On January 4, FDA announced Center for Veterinary Medicine director Steven Sundloff would take over the food center.

There’s been some serious difficulty getting a large number of qualified external candidates, the ex-FDAer maintains, since the October 2007 departure of former CDER director Steve Galson due to his appointment as acting US Surgeon General. That’s understandable, according to the individual: “Who’d want a job when you won't know who your boss will be a few months out, where public perception is on the down slope, there’s little likelihood of getting substantial new appropriations, and you won't even be allowed to say you need more resources.”

That’s a convincing argument against wanting the job, wouldn’t you agree? When the search began in October 2007, an outsider taking over the drug center appeared to be a slam dunk. But now, as the French would say, c’est pas tout a fait evident. (Note: Washington Redskins fans are a little more cultured than the Eagles fans who occasionally write for this blog. We speak multiple languages, go to art museums, climb mountains…oh and we win Super Bowls.)

It appears that a serious internal candidate has, in fact, emerged.

We don’t know who it is, but we can speculate can’t we? Sure we can.

1) Center for Biologics Evaluation & Research Director Jesse Goodman:

As we noted in our earlier CDER search story, Goodman was the only FDA insider garnering serious consideration for the job at the outset. Goodman, a virologist, was named CBER director at the end of 2002, replacing Kathy Zoon, who moved to the National Cancer Institute.

The CBER head came to FDA in 1998, originally in the Office of the Commissioner directing the US Interagency Task Force on Antimicrobial Resistance. He later moved to CBER, where he worked on bioterrorism preparedness and blood and vaccine safety, eventually becoming deputy director before taking over for Zoon.

Most importantly for Goodman’s chances, he’s shown that he can run a large center within the agency’s organizational structure that operates in a similar fashion to CDER.

Odds: 3 to 1

2) CDER Deputy Director Douglas Throckmorton:

Time and time again, when the CDER search is brought up to FDA observers and former agency officials, I hear: “Why not Throckmorton?” Well, why not? Throckmorton would appear to be the obvious choice considering he has been the center’s number two for the last two and a half years. He served in an acting capacity for a year prior to that.

Before his promotion to deputy director, Throckmorton headed up the cardio-renal drugs division—a very high profile review group within FDA.

He also serves as chair of FDA’s Drug Safety Oversight Board, CDER’s liaison to the agency’s human subjects’ research review board, and chair of the center’s research coordinating committee.

Throckmorton has been involved in some interesting FDA meetings as of late. On January 9, “acting for” Woodcock, Throckmorton made a presentation to students and faculty at Duke University’s Fuqua School of Business along with Office of Medical Policy director Robert Temple. We know, we know, not the strongest evidence that he’s next, but still.

On January 17, the CDER deputy was involved in a senior CDER management meeting with PhRMA board representatives, including soon-to-be-retired Eli Lilly CEO Sidney Taurel, Lilly VP-global regulatory affairs, and PhRMA deputy VP for scientific and regulatory affairs Alan Goldhammer.

Meetings aside, Throckmorton has been viewed as somewhat of a rising star at FDA. He joined the cardio-renal drugs group in 1997 as a medical reviewer. Three years later, he was named deputy director of the division, and director two years after that.

So what’s the problem? One theory is that Throckmorton is too young. That seems a bit dubious considering all of his current responsibilities and fast rise up the career ladder. But if FDA were going to name Throckmorton as Galson’s replacement, they would have done it by now. After all, they passed on giving him the “acting” title altogether in favor of Woodcock, who previously ran the drug center.

Despite initially getting passed over, I still think he’s a very strong candidate and running right behind Goodman.

Odds: 5 to 1

3) Office of New Drugs Director John Jenkins:

Okay, we admit we are a bit in the tank for Jenkins. He recently took the time to speak at length with The RPM Report about the state of new drug approvals (aka the drug approval drought), drug safety, and the new drug reform regulations under the FDA Amendments Act. You can read it here if you haven’t already.

Before the interview, we thought Jenkins was a smart thinker and effective spokesman on regulatory issues. We are more convinced than ever afterwards.

Jenkins’ position alone as FDA’s top drug reviewer is enough for him to warrant consideration. He oversees 17 drug divisions and a number of important office-level groups within CDER. To see them all, click here.

You could argue that Jenkins’ ability to keep drug review times in check—actually reducing priority and standard review times in 2006—while reviewers are spread increasingly thin under a climate of poor morale makes him the most prepared to take over the drug center.

Case in point, FDA/Sponsor meetings have more than doubled over the last five years and Jenkins has calculated in the past that drug reviewers have nine industry meetings every working day of the year. In addition, new drug applications have increased in the 10% range while FDA’s budget has remained flat.

Publicly, Jenkins has been even more impressive. During a June House Oversight & Government Reform Committee hearing looking into the handling of heart risks linked to Avandia, Jenkins performed admirably before a host of Congressional lawmakers looking for blood.

He was equally impressive during a media briefing on January 25 to discuss how FDA planned on handling data from Schering-Plough/Merck’s ENHANCE study on the statin Vytorin. Click here to read our take on FDA’s response to questions about the Zocor/Zetia combination.

Jenkins is also an FDA veteran with 16 years under his belt, six as the head of the Office of New Drugs, and considered to be one of Woodcock’s “people.” One thing that could preclude him from getting the job is that the whole Vioxx debacle occurred while he was in charge of OND. But if that’s the case, none of the internal candidates listed here stand a chance of getting the CDER job.

Odds: 7 to 1

4) Office of Medical Policy Deputy Director Rachel Behrman:

Ah, the Dark Horse. There’s always a dark horse candidate. When you flip through the obvious internal candidates, Behrman doesn’t come to mind. However, one former FDA official says Behrman could be the most serious internal candidate.

Behrman was picked by Woodcock to head the Office of Critical Path Initiatives in the Commissioner's Office--an important priority for the agency in general and Woodcock in particular. That is in addition to her role as second-in-command to the dean of drug development Robert Temple in the medical policy office. And in her spare time, Behrman also serves as Director of the Cross-Centers Initiatives Task Force. That’s just the kind of collaborative position FDA Commissioner Andrew von Eschenbach has tried to promote within the agency.

Behrman joined FDA in 1989 and has some experience in the spotlight that the CDER director operates under. For instance, she testified before the Senate Special Committee on Aging regarding in 2005 regarding the impact of direct-to-consumer advertising on seniors. The full testimony is right here. The fact that the Division for Drug Marketing and Communication reports into the Office of Medical Policy probably serves as an advantage as DTC continues to remain a public and political focus.

Behrman’s obvious drawback as a candidate is that she has less direct experience with product reviews than the other candidates. Of course, if FDA's first choice would be an outsider, that drawback could actually be a selling point to the search committee.

Odds: 15 to 1

Place your bets.

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The Wacky World of Generics: Fosamax Edition

Today, Merck bids a fond farewell to its Fosamax franchise, as the first generic versions enter the market.

Three generic firms are entering the market: Barr and Teva with approved ANDAs, and Watson with an "authorized" generic supplied by Merck. Next up will be generic versions of the Fosamax D formulation (expected in April) and then numerous additional generics in August when the 180-day generic exclusivity period awarded to Barr and Teva expires.

Authorized generic launches are hardly surprising anymore, as brand firms are committed to maximizing the value of their brands through the patent expiry period. What is surprising is the unusual lengths Merck went to to give Fosamax a send-off in style.

The company ran a promotional campaign in the final months before patent expiration highlighting the upcoming Fosamax generic launches, and even created a website called GoingGeneric.com to promote Fosamax. Merck drove traffic to the site via links on its main Fosamax website as well as through a "multi-channel physician campaign" that included direct mail and journal ads.

We would love to show you the site, which featured a neat animated video of a Fosamax patient on the beach, but Merck has taken it down. The site "served its purpose," a spokesman says. Here is Google's cached version of the page, which has no graphics but at least shows the basic messages Merck was pushing.

The overall theme: Fosamax allows patients to "Save Now and Save Later." In other words, starting new patients on Fosamax rather than a competitor like Boniva or Actonel meant lower copays right away (since most managed care plans had Fosamax on tier 2) and then even lower copays now that generics are available.

In other words, Merck did everything in its power to build a bigger market for the generics that launched today.

What's going on here? Does anyone else remember the good old days when Big Pharma companies would simply shift resources away from brands in their final quarters of exclusivity, jack up the price, and concentrate on new products?

Well, those days are obviously over. "Maximizing the value of the brand" (or, perhaps, milking every drop from a cash cow) is critical business for big pharma at a time when new product launches have slowed to a trickle and cost cutting is the order of the day. At a time when hitting profit targets is a quarter to quarter war of attrition, every penny counts.

That is why Merck not only ran the campaign, but also highlighted it to investors during its December 4 analysts day. "We are prepared for a number of different potential scenarios to insure that we maximize the value of the Fosamax franchise," CFO Peter Kellogg said, and then discussed GoingGeneric.com as an example.

Merck says it expects Fosamax revenues in the range of $1.1 billion to $1.4 billion worldwide in 2008 (down from $3 billion in 2007). That's a big drop no matter what, but the difference between the high and low ends of the range is $300 million. You can bet Merck would love to have that in revenues rather than make it up in job cuts or other efficiency initiatives.

So, if the going generic campaign helped drive higher brand sales in the first six weeks of the year (and then higher sales of the authorized generic during the spring and summer) it would be a big deal for Merck.

Did it work? Its hard to say. Fosamax revenues increased 1% in the fourth quarter to $522 million. That is not exactly spectacular growth, but it reversed a downward trend in sales throughout the year, and helped Merck hit its goal of $3 billion in global revenue for the brand in 2007.

During Merck's fourth quarter call in January, Kellogg credited Fosamax's strong showing to its favorable formulary position in anticipation of generic entry, but did not specifically comment on whether the Going Generic campaign made a difference. And a Merck spokesman declined to provide any additional details about the performance of the campaign, saying the company didn't want to share any lessons learned with the competition.

Whether or not the campaign itself worked, the idea is here to stay. In today's world, Big Pharma has not choice but to drive sales growth of all its brands through every means possible--even if it means building up the market for its generic competitors.

That may be a sign of desperation for Merck, but it is a nice treat for Barr and Teva who unequivocally benefit from anything Merck did to increase the size of the Fosamax market over the past few months.

Our only question: when will Teva and Barr be launching GoneGeneric.com?

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FDA’s Budget: “Maintain Momentum” or “Inadequate Resources”?

Welcome to the battle of the budget numbers.

To hear it from the Bush Administration, the president’s fiscal 2009 budget request for FDA is quite generous. The $2.4 billion request is a 5.7% increase over the previous year—a nice little boost in an otherwise tight budget environment. And it really looks good when you compare it to the 3% budget reduction the president is recommending for the Department of Health & Human Services overall.

As FDA chief operating officer Jim Dyer put it yesterday, the president’s budget request will “maintain momentum” over 2008 funding levels, allowing FDA to “target the critical areas that have been identified by the Commissioner and the Secretary.” The increase, he said, “gives us a real good start and lays the groundwork of where we need to go.”

Others would dispute that analysis. The Alliance for a Stronger FDA, which has been advocating for greater funding for the agency, notes that the Administration’s budget is an increase of just 2.9% in appropriated funding (from $1.72 billion to $1.77 billion). The balance comes from user fees paid to FDA by industry, which would increase 14.4%.

“FDA is in critical need of significant new resources,” William Hubbard, a former deputy commissioner and Alliance member said. “The amount in the Administration’s proposed budget is not only inadequate, it is barely half of what FDA needs just to keep pace with inflation.” What FDA really needs, the Alliance says, is an additional $380 million in appropriations, or seven times the Administration’s request.

The battle over funding for FDA was previewed during a House Oversight & Investigations subcommittee hearing last week. The topic was an FDA Science Board report that found the agency to be so deficient in its scientific and technological capacities that it is unable to meet its regulatory responsibilities. You can find our earlier post on that here.

And money is the biggest obstacle: while FDA has received generous raises in user fees over the years for activities like new drug reviews, other areas—like drug safety, information technology and guidance development—have largely been funded by appropriated dollars, which haven’t kept up with inflation.

Last week’s House hearing demonstrated the conundrum FDA faces. Congress loves to beat up on FDA for not asking for more money, but then doesn’t actually give the agency any more money to do its job. It’s a vicious cycle: the agency can’t do its job without more money, and it can’t get more money because it’s not doing its job. Once the dust clears, that’s an awful lot of time and money spent on getting nowhere.

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White House Tries to Jump-Start Follow-On Biologics

The Bush Administration seems to think it’s time for FDA and Congress to get back to work on developing a follow-on biologics approval pathway.

The president’s $2.4 billion fiscal year 2009 budget request for FDA lays out an agenda for an abbreviated approval process on follow-on, or “generic,” biologics. “The budget proposes a new authority for FDA to approve follow-on protein products through a new regulatory pathway that protects patient safety, promotes innovation, and includes a financing structure to cover the costs of this activity through user fees,” the request says.

During a conference call, FDA deputy commissioner for operations Jim Dyer said the agency would work with Congress to submit legislation authorizing an abbreviated pathway for follow-on biologics. That’s not really news; the agency has been in discussions with Capitol Hill and industry stakeholders for some time, and has testified in congressional hearings that it has the scientific expertise to support an approval process.

Legislation authorizing a follow-on biologics pathway came close to being attached to the drug safety/user fee bill last year, but was pulled at the 11th hour. For more coverage on the bipartisan negotiations—and what the final deal looked like—click here and here. Subscribers to The RPM Report can read the content for free, or you can sign up for a 30-day free trial.

Practically speaking, the mention of follow-on biologics in the budget request won’t result in much. Finalizing something as controversial as an abbreviated approval process for follow-on biologics during an election year is more than a little optimistic; any real work probably won’t get underway until there is a new president in the White House in 2009.

But the budget request does set the president’s agenda for FDA for the next fiscal year, and lays out what the White House hopes to see the agency accomplish. At the very least, the mention of follow-on biologic user fees will trigger a score from the Congressional Budget Office, which, should it demonstrate savings to the health care system, would be handy during the next round of negotiations.

The request also includes a call to revive user fees for pre-reviews of direct-to-consumer advertising television commercials. A program was enacted as part of the FDA Amendments Act, but Congress killed it off by refusing to fund it in the omnibus appropriations bill. (For more analysis of that story, click here.)

So the Administration, at least, hasn’t given up on that program. Of course, we already knew FDA and industry were eager to make it work—it is Congress that has been of two minds on the DTC program—enacting it in September and killing it in December.

So don’t get too excited about follow-on biologics or DTC user fees. The President’s budget keeps hope alive for action on each this year. But it doesn’t change the basic truth that both issues depend primarily on the priorities of a Democratic Congress in an election year—not the final budget from the outgoing Administration.

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