While You Were Settling

Well, it was an interesting weekend: the writers' strike may have been settled, Obama swept (and won a Grammy), and there was an unusual amount of blood spilled around the NHL (Lets Go Flyers!). But what happened in your world?

• First up: AstraZeneca is considering sale of some GI research projects, according to a Swedish newspaper (via Reuters). Perhaps Dagens Industri reads IN VIVO: we reported this news back in November!


• The NYT reviews the options for those of you who want to do a little personal genome spelunking. In other consumer genomics news, deCODE announced on Sunday the launch of a genomic test to identify individuals with a higher risk of prostate cancer.
  
• Newron announced early Monday that it was buying the private CNS-focused biotech Hunter-Fleming, for €8 million in stock plus a potential €17 million in earnouts (also in shares).


• “Generally I am very brave…only today I happen to have a headache.”
  
• Sorry, but we have to be firm on this one: Atonement should not have won best film at the BAFTAs last night (we loved the book, but...). And riddle us this: how does it lose in the 'best British film' category yet win 'best film'?

photo by Flickr user Here in Van Nuys used under a Creative Commons license

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Reputation Counts

Merck has fallen a long way from the days when its CEOs adorned the front cover of Time magazine as respected business leaders (George Merck in the 1950’s) and icons of cutting edge scientific research like the (Roy Vagelos in the 1980s and 1990s).

The image of Merck as the “moral corporation,” the respected leader in innovative pharmaceuticals and research, has suffered blow after blow in the past four years. The most recent hit is a non-admission settlement with the Justice Department and state authorities of charges that the company abused the Medicaid best price rebates and marketing practices. "Non-admission" meaning, "We'll pay the fines, agree to give the government extensive future rights to oversee pricing documents and marketing practices--but we will not admit wrong-doing."

The accumulating financial costs of the bad news events keeps rising: the loss of the $2.5 billion Vioxx franchise; a $4.85 billion agreement to settle liability claims from that product; an 8% drop in total prescriptions in the Vytorin/Zetia group due to the failed ENHANCE trial; and now $670 million in payments to the feds and states to settle the Medicaid case.

But the real cost may be in the future, when Merck takes this new public image with it into efforts to get approval for drugs like the weight loss product, taranabant.

Merck has made some smart hires along the way to prepare for a careful review of the cannabinoid compound including a former senior officials from the FDA review group that will look at taranabant, Robert Meyer, (see here) and the former top FDA drug safety manager, Peter Honig. Their experience should help inform Merck’s handling of the application for the obesity drug and provide solid, knowledgeable advice on ways to assure FDA that the company knows how to address the psychiatric side effects that derailed Sanofi-Aventis’ Zimulti (rimonabant) application.

One of the likely prerequisites for getting an anti-obesity product through FDA, however, is for the sponsor to convince the agency that it will control use of the product carefully and find a patient population for whom the benefits clearly outweigh the risks.

Here is where Merck’s new reputation of pushing in every way it can to extend the market for its products will work against it.

When Merck commanded a high-road image, the company treated its reputation as a corporate asset, a strength that it could use for ambitious but trusted efforts to open new drug categories. The company may have given up some of that strength.

Merck used to have PR people assigned to watch and protect its long-term reputation, paying attention to more than the short-term news cycle and the liability wars. One of those execs, John Doorley, currently the director of NYU’s masters program in public relations, literally wrote the book on “Reputation Management”.

Maybe Merck needs to get a new copy of the book and pay some more attention to rebuilding the trust of the public and regulators before heading into promising but perilous new drug categories.

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Friday Night Lowlights: Don't Leave Town Early

The Food & Drug Administration has apparently decided that "early communications" are best delivered late in the week.

Today its Botox.

Last week was Chantix.

Two weeks ago, it was Vytorin and ENHANCE.

Keep your Friday afternoons open.

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FDA-CMS Parallel Reviews: A Mixed Bag

Parallel reviews by the Food & Drug Administration and the Centers for Medicare & Medicaid Services may be just around the corner.

According to a research note put out by Stanford Group’s David Blaszczak, Greg Frykman and Jan Wald earlier this week, the agencies are close to issuing a Federal Register notice that will solicit comments on a voluntary program that would allow a manufacturer to receive an approval from FDA and a national coverage decision from CMS at approximately the same time.

The idea for a parallel review process was first proposed after Mark McClellan left his post as commissioner of FDA to become administrator of CMS in 2004. Given his experience at the heads of both agencies, it seemed natural that McClellan would be interested in a closer relationship between FDA and CMS, but plans for a demonstration project were eventually scrapped.

Questions about whether the agencies were starting to work more closely together resurfaced during the erythropoietin safety debate. Rather than wait for FDA to conclude its safety review of EPO, CMS conducted a simultaneous assessment and issued a national coverage decision before FDA had reached a final conclusion on restricted labeling. We have covered that story extensively in The RPM Report; subscribers can click here and here to read all about it.

So what would parallel reviews mean for industry? The majority of manufacturers certainly won’t be pleased about the potential for FDA and CMS to work more closely together: the Stanford team notes that drug and biologic sponsors are likely to complain about a more extensive FDA review process, which could slow down drug approvals. Confidentiality is also likely to be a top complaint.

But industry’s queasiness also stems from a fear that parallel reviews could blur the line between two agencies with two very different missions: FDA’s review of safety and efficacy, and CMS’ determination of whether coverage is “reasonable and necessary.” Inevitably, the conversation turns to whether cost would start to become a factor in either decision—the same reason that most of industry remains uneasy about a national center on comparative effectiveness.

Since the proposed process would be voluntary, it’s likely most manufacturers won’t take advantage of it. But Stanford believes that “forward-thinking” companies should consider it, under the following circumstances:

• they have a potentially successful product anticipated for, or in registrational development,
• that is likely to cause a paradigm shift in the management of one or more serious and life-threatening diseases and;
• for which premium pricing is under internal consideration.

If nothing else, the proposal should serve as a reminder that sponsors should avoid waiting until after FDA approval to open coverage discussions with CMS. On the contrary, that exchange needs to take place early and often.

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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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