Deals Of The Week: The ASCO Edition

ASCO is just moving into full swing, but already the press releases are flying fast and furious. Biotechs have long looked to this meeting as a means to showcase their smarts and increase their profile with public investors. But as big pharmas have set their sights on oncology as the therapeutic area of choice -- given its high unmet medical need and, historically, generous reimbursement, there's no doubt ASCO is now a critical meeting for even the biggest players in the industry.

Like last year, the particular tumor type driving a lot of investor interest at this year's Chicago confab is melanoma. Since presenting robust Phase III data at ASCO 2010 showing a survival benefit for Yervoy, Bristol-Myers Squibb has gone on to win rapid approval for its CTLA-4 inhibitor. This year, investors and clinicians will be watching for new data measuring Yervoy efficacy in pretreated melanoma patients; they'll also be monitoring the data associated with Plexxikon/Roche's vemurafenib, which is pending FDA approval for use in patients with the BRAF V600 mutation, a specific genetic abnormality observed in about 50% of melanoma patients.

As "The Pink Sheet" Daily notes, it's not entirely clear how the melanoma market will shake out when both products are finally on the market. They may be competitors, but given their different modes of action -- Yervoy stimulates the immune system, while the Plexx/Roche drug targets only tumor cells that carry the V600 abnormality -- it's equally likely they could act synergistically. Certainly neither drug on its own works in all patients or offers a long-term cure, even if both extend median patient survival in clinical trials.

Thus, the news June 2 that Roche/Plexxikon would find a way to work with BMS to study the two drugs in combination seemed almost a fait accompli. The press releases issued (from three different companies no less) were long on breathless prose and short on detail: the parties will conduct a Phase I/II study evaluating safety and efficacy of the two drugs in combo, but did not provide more clarity on the trial's design, its timing, or its enrollment. "If appropriate, the companies may conduct further development of the combination," Bristol said in its press release.

You will notice there's also no information on the economic sharing that might come from such a clinical collaboration either. That's hardly surprising. We've yet to see much in the way of financial deets for earlier tie-ups in oncology: AstraZeneca's 2009 alliance with Merck to combine development of their respective clinical-stage MEK inhibitor and AKT inhibitor; or Sanofi's December 2010 deal with Merck Serono to marry their Phase I PI3 Kinase- and MEK-targeting molecules.

Despite the increasing complexity of the oncology market, one in which payers are taking a more active role in controlling costs, such cross-collaboration remains the exception rather than the rule. There are plenty of reasons why: issues around control, valuation, and overlap with other non-partnered products mean it can be tough for two large companies to come to agreement on how to share knowledge and find ways to work together.

That BMS and Roche have found a way to do so can only be a smart thing. The reality is organizations like US Oncology, Cardinal's P4 Healthcare, and Via Oncology are going beyond traditional treatment guidelines recommended by the likes of ASCO and the National Comprehensive Cancer Network, working with payers to provide "clinical pathways" that aim to standardize treatment for a specific disease or tumor type. Aimed for now at treating the most costly cancers, these programs, which are still in pilot mode at major players like Aetna, Blue Cross Blue Shield and Highmark, reduce the wide latitude US doctors have historically enjoyed when prescribing oncologics.

The ultimate impact of these pathways on the biopharma industry isn't yet known, but as we write in this IN VIVO feature, their advent has real consequences for how companies should approach drug development. And while it's very early days to be talking about a melanoma pathway, doing clinical trials to show the merit of your drug in conjunction with a competitor, when it's highly likely to see real-world use in such a combination, just makes sense. (We also wonder how this impacts GSK's Phase III melanoma drugs, its MEK1/2 inhibitor and its BRAF protein kinase inhibitor. Can these earlier stages medicines get traction in the current competitive marketplace? GSK certainly hopes so, and has its own combo trials ongoing.)

Will we see more cross-company clinical stage oncology pair-ups in the future? We hope so. Could such alliances be broader and extend beyond on-offs to a ViiV type arrangement? We're doubtful given the deal making complexities and nearly every pharma's desire to be tops in oncology. But as crazy as that idea sounds, it'd be a clear choice for 2011's DOTY.

In the interim, we always have ASCO (if not Paris) and...

Clovis/Pfizer: Attention biopharma trend watchers! We bring you this news flash of another sighting of that rare bird in the wild: the out-licensing. On June 2, Clovis announced it was licensing Pfizer's Phase I/II Poly (ADP-ribose) polymerase (PARP) inhibitor, PF-01367338, for an undisclosed upfront sum. Under the terms of the agreement, Clovis Oncology will take over responsibility for global product development and commercialization, and in addition to paying the u/f, will owe Pfizer additional downstream fees milestones totaling up to $255 million (pending success in the clinic and commercially, of course). Interestingly, as part of the out-licensing, Pfizer Venture Investments is taking an equity stake in the biotech. (So it's a licensing AND a financing in one blow.) Not that Clovis is hurting in the cash department. Recall Clovis, a START-UP A-lister, pulled in one of the biggest Series As EVUH in 2009. PARP inhibition is, of course, a hot topic at ASCO, and a quick search of the pipeline database Inteleos, shows there are more than a dozen drugs in development against this target, including some that are much further along, including Sanofi's iniparib (Phase III, originally developed by BiPar), AstraZeneca's olaparib, and Cephalon's CEP-9722. The press release announcing the news emphasizes '338 is a "potent" PARP inhibitor, so it's a bit curious that Pfizer would give it up unless its trying to walk the talk of jettisoning anything not first-in-class or best-in-class. (But that raises other questions, including what does Clovis see in the compound?). Separately, Clovis also announced this week plans to develop in concert with Roche an in vitro PCR-based companion diagnostic linked to EGFR mutations.--EL

Johnson & Johnson/AVEO: Months after partnering its lead asset tivozanib in a lucrative deal with Astellas, Aveo has extended its network of partners with an early stage deal with Johnson & Johnson's Centocor Ortho Biotech division. The Cambridge, Mass.-based biotech announced the licensing deal for compounds targeting the RON (Recepteur d'Origine Nantais) receptor - believed to play a role in cancer development - for $15 million upfront May 31. Under the deal, Aveo will receive half of the $15 million in an upfront payment and the rest through a separate equity investment that gives J&J a 1.25% stake in the biotech. Given the early-stage nature of the deal, it's not surprising the arrangement is back-end loaded, with Aveo eligible to receive up to $540 million in development, regulatory and commercial milestones. Aveo will also receive tiered, double-digit royalties on sales of any products stemming from the collaboration. Centocor will be responsible for clinical development, manufacturing, commercialization and costs. J&J will also fund some research to be conducted by Aveo to identify biomarkers for patients most likely to respond to treatment with RON-targeted antibodies. "It is about building out a portfolio," said Aveo Chief Business Officer Elan Ezickson of the collaboration in an interview with "The Pink Sheet" DAILY. For J&J, the deal provides access to what could be an important product in oncology, an area of critical importance to the big pharma's overall business success. -- Jessica Merrill

AstraZeneca/Heptares: (Spoiler alert. No oncology refs in this deal.) UK biotech Heptares Therapeutics signed its third Big Pharma agreement in two months this week, this time with AstraZeneca. The two companies have entered into a four-year research collaboration to discover and develop new medicines that target G-protein coupled receptors (GPCRs). AstraZeneca will have worldwide commercial rights to product candidates emerging from the collaboration, with Heptares receiving $6.25 million in unconditional upfront payments plus committed research funding and future milestones. Heptares will also receive royalties on product sales. Research teams drawn from both companies will focus on a number of GPCR targets known to be linked to CNS/pain, cardiovascular/metabolic and inflammatory disorders. The deal brings to more than $13 million the total upfront money that Heptares has received from its pharmaceutical partners this year, which together add an extra 18-20 months to the biotech's cash runway, according to CEO Malcolm Weir. It also represents further validation for the four-year-old company's technology, which helps stabilize GPCR molecules. That AstraZeneca is modality-agnostic in this deal - purporting to seek both small- and large-molecule candidates - reflects the growing importance of the Big Pharma's MedImmune biologics subsidiary within its overall R&D operations.--John Davis
Johnson & Johnson/Diamyd: J&J's Ortho-McNeil-Janssen (OMJP) signed one early stage deal this week -- and called it quits on another. It was barely a year ago when Elisabeth Lindner, then President and CEO of the Swedish diabetes outfit Diamyd, pronounced on a quarterly earnings call that "a new chapter has begun" as a result of the firm's $45 million upfront licensing agreement with OMJP. That chapter closed on June 1, when OMJP returned all rights to the Phase III GAD65, an antigen-based therapeutic vaccine designed to preserve beta cells in type 1 diabetics. A big disappointment to Diamyd and its shareholders, the news can hardly be called surprising. (We're even tempted to say the writing was on the wall.) On May 9, the two companies reported clinical trial data from a European pivotal study, showing GAD65 failed to meet the primary efficacy endpoint of preserving beta cell function in new diagnosed Type 1 diabetics after 15 months of therapy. Although the company noted "a small positive effect was seen", the data weren't good enough to keep OMJP engaged -- and, importantly, willing to shoulder any additional development costs. Recall the 2010 deal stipulated the two partners would share R&D costs until results of the first Phase III study were available, at which time OMJP had the option to assume full development of the drug candidate. It can't be an easy message to give shareholders, but Diamyd's acting president and CEO, Peter Zerhouni (who replaced Lindner after her abrupt departure in late April) did his best to spin the news positively. "With all the rights to returned to us we are free to decide on how to extract the most value from GAD65 going forward," he said. Whether Diamyd can sign a new partner near term is unclear -- a therapeutic vaccine for diabetes is scientifically risky and it's hard to see a lot of interest after the disappointing Phase III study results. (Even Diamyd doesn't seem that interested. In the wake of OMJP's decision it announced it would shelve a planned longer term follow-up of patients in the European trial.) Investors may have more clarity on GAD65's potential partnerability by end of June -- at the upcoming ADA meeting Diamyd will present data on the European trial, presumably providing greater detail about the small positive effect. There's also a Phase III ongoing in the US due to read out in 2012 and two other externally funded studies that may yet result in the vaccine's resurrection.--EL

AZ's Payer Push No Help to Brilique in France

These days, you've got to schmooze with the payers as well as the regulators. AstraZeneca knows that; it has indeed been playing up its payer-focused strategy, with recent declarations of its bid to become "the number one company in terms of payer interactions," according to top AZ dealmaker Shaun Grady.

So it should have known that just because clot-buster Brilique was approved by the European authorities in December 2010, that wasn't the end of the story. And indeed, the French health technology assessment agency, known as the Transparency Commission, following a Jan. 19 review meeting, rejected the drug for reimbursement/pricing discussions. Hence AZ withdrew its submission.

The agency is concerned about the drug's side-effect profile, and was also influenced by FDA's lukewarm response to AZ's application for approval in the U.S.: FDA in December sent the company a complete response letter questioning the drug's efficacy in U.S. patients.

Fair enough; after all, the drug didn't seem to work among the U.S. cohort of AZ's 19,000-patient, multi-national Phase III trial. There are all sorts of discussions ongoing as to whether it's because the U.S. patients were on higher aspirin than those in other countries. According to AZ, the French want to see additional information, including clinical data contained within the company's response to the CRL, which was submitted on Jan. 21. (In other words, too late for the French meeting).

Anyway, the moral is that payers are likely to jump on concerns raised by any approval agency, even those outside their own territories. (We don't suspect France's concerns are anything to do with the fact that the genericizing competitor drug Plavix is ... well, French.)

It's tough luck for AZ, though, despite its best intentions (..."we're meeting payers' needs for value-based product differentiation by improving our ability to assess clinical and economic outcomes in real-world populations (as an example, earlier this year we announced a new outcomes study we were kicking off for Brilinta) declared an AZ spokesperson earlier this year).

France accounts for nearly a third of the market share for anti-platelet drugs in Europe, according to Sanford Bernstein analyst Tim Anderson. And AZ needs Brilique it faces expiries for Nexium and Seroquel. It also needs the drug to start generating revenues fast, because Plavix is either going or gone off patent.

AZ says it plans to supplement the Brilique reimbursement dossier and plans to resubmit to France's Transparency Commission within the coming months. Hopefully for it, the French set-back won't give FDA, set to rule by July 20, any further concerns. Anderson suggests in a March 23 note that "the odds of a negative ruling would seem to increase at least slightly."

Zut alors.

Update: AZ has corrected us on a couple of technicalities: The Transparency Commission didn't actually reject Brilique, they asked for additional information, and AZ withdrew its submission. Similarly, FDA wasn't questioning the drug's efficacy in U.S. patients, it was requesting additional analyses with respect to those patients. Sorry.

Deals Of The Week Takes Action

It was quiet on the deal making front as major news this week was of a regulatory or clinical nature. Despite a three-month delay, GlaxoSmithKline and Human Genome Sciences earned a BlyS-fully easy approval March 9 for Benlysta (belimumab), the first new lupus treatment in 56 years. That the approval didn’t come with a risk mitigation scheme or onerous labeling shows yet again that regulators are treading lightly in arenas where good therapeutic options are lacking. (Just practice the phrase "unmet medical need" three times fast.)

The good news about Benlysta was likely a comforting balm for GSK – or at least distracted the big pharma’s investors. Less than 48 hours later, the company and its partner Tolerx announced disappointing results for a Phase III trial of their humanized anti-CD3 monoclonal antibody for Type 1 diabetes, otelixizumab. Otelixizumab’s failure wasn’t entirely unexpected: a similar drug from Eli Lilly (remember them?) and MacroGenics called teplizumab has also floundered in the clinic.

While otelixizumab's results haven't yet sparked a “no-deal”, it wouldn’t be surprising if GSK were to decide the DEFEND-1 data made its 2007 agreement with indefensible. For the moment, the big pharma is investigating additional dosing regimens of the drug and has halted recruitment in a separate clinical trial.

Of course, GSK has to share the late-stage failure spotlight with Sanofi-Aventis and its partner Regeneron, who revealed this week that their non-small cell lung cancer drug aflibercept failed to increase overall survival time relative to comparator docetaxel in a Phase III study. The announcement is a definite setback for the French pharma, which has spent the past two years rebuilding its oncology business with a greater emphasis on targeted therapeutics and biologics.

Of course, the failure also raises questions about Sanofi’s ability to meet its revenue goals via its internal pipeline, illustrating yet again that to scale its 2013 patent cliff, the drug maker had few options but to consider a sizeable acquisition on the order of Genzyme. (If anyone's still curious about that M&A, we'll have more in the c oming March IN VIVO.)

Aside from clinical setbacks, this week’s deal-making highlights feature Japanese pharmas, academic collaborations and the importance of reprofiling existing compounds to identify potential new uses. Drumroll, please...

Eisai/Epizyme: Privately-held Epizyme’s March 10 agreement with Eisai is the biotech’s second big pharma partnership of the year, following a January tie-up with GlaxoSmithKline. But Epizyme CEO Robert Gould is eager to stress that the two deals are different and serve separate parts of his firm’s business strategy. The deal with Eisai centers around EZH2, a preclinical epigenetic enzyme expected to yield treatments for lymphoma and other cancers in genetically defined patients. As part of the deal, Epizyme will receive $6 million upfront and can earn up to $200 million in milestones and up to double-digit royalties. The Japanese pharma also will cover 100% of R&D costs through human proof-of-concept, at which point Epizyme can opt in to share development and U.S. commercialization costs and profits. In contrast, the GSK deal centered on a defined but undisclosed package of histone methyltransferases. GSK paid $20 million upfront with the potential for up to $630 million in milestones plus double-digit royalties. That deal is basically a “handover” of the related assets to GSK, whereas the Eisai deal involves joint decision-making with the possibility of Epizyme taking on the role of full partner, says Gould. If Epizyme elects to opt in after proof-of-concept, it would co-commercialize the resulting drug in the U.S., while Eisai would retain development and commercial rights for the rest of the world.--Joseph Haas

AstraZeneca/Galderma: AZ on March 7 signed up global dermatology giant Galderma to reprofile some of its assets to treat skin diseases such as psoriasis, acne and atopic dermatitis. The five-year R&D agreement, for which financials weren’t disclosed, sees the French-based biotech gain access to several already-identified AZ compounds from within the big pharma’s core therapy areas, including oncology, inflammation and central nervous system. The deal is both a sign of the times, and a reminder of how AstraZeneca stands apart from some of its big pharma peers. It’s another example of large drug firms’ push to squeeze out all the value they can from their assets, especially in non-core therapy areas. This is the second reprofiling alliance AZ has struck: in 2009 it signed a similar agreement with Alcon in ophthalmology. Under terms of that deal, should Alcon discover potentially interesting compounds, it can license them on a case-by-case basis, with AZ eligible for regulatory milestones and royalties. The Galderma tie-up also emphasizes AZ’s ‘pure-play’ strategy and its preference to team up with recognized experts in areas it considers outside its expertise. That’s in contrast to companies like GlaxoSmithKline, which paid $3.6 billion in 2009 to buy dermatology player Stiefel, creating its own specialist business with attractive, risk-mitigating trimmings including OTC and aesthetic portfolios. Not that dermatology is, strictly speaking, a new opportunity for either GSK or AZ: both used to have their own skin-care businesses, in the days before dermatology went out of fashion. --Melanie Senior

Evotec/Harvard: It ain't just big pharma heading back to school. Even biotechs are looking for tie-ups with universities these days. German small-molecule drug discovery company Evotec announced a deal this week with Harvard University and the Howard Hughes Medical Institute to investigate new therapies for diabetes, specifically in the area of beta cell replication. Financial terms weren’t disclosed. Harvard professor Doug Melton will be the principal investigator, working alongside Chevy Chase, Md.-based nonprofit HHMI and the German pharma. The move deepens Evotec’s commitment to diabetes, following a deal last summer to acquire metabolic disorders specialist DeveloGen. That company, now operating as an Evotec subsidiary, has multiple projects underway, including insulin sensitizers and drugs that prevent destruction of existing pancreatic cells as well as compounds that induce beta cell regeneration. Its immune-modulating drug DiaPep277, which protects pancreatic cells, is in Phase III trials, and was partnered with Andromeda prior to the acquisition. DeveloGen also has an ongoing discovery partnership with Boehringer Ingelheim. Evotec says the goal of its new arrangement with Harvard and HHMI is to create orally available small-molecule drugs that trigger or support beta cell regeneration. --Paul Bonanos

Yakult Honsha/Aeterna Zentaris: Behold another sign that regional deal-making is alive and well. On March 9, came news that Aeterna Zentaris, a Canadian company specializing in oncology therapies, has partnered Japanese rights to its lead oncologic, perifosine, for $8.3 million upfront and another $60.9 million in clinical and regulatory milestone payments. Perifosine is a novel oral medicine that inhibits Akt activation in the phosphoinositide 3-kinase (PI3K) pathway, which is associated with programmed cell death, cell growth and cell survival. Phase III trials in colorectal cancer and multiple myeloma are ongoing in the U.S. and EU.The deal with Yakult Honsha, a diversified Japanese player that develops foods, beverages and cosmetics in addition to pharmaceuticals, represents the third time Aeterna has sliced up rights to perifosine. In 2002, it licensed North American rights to the molecule, in Phase I studies at the time, to privately held Access Oncology for at least $18 million. (Those rights transferred to Keryx Biopharmaceuticals when it purchased Access Oncology two years later.) Aeterna also cleaved off Korean rights to the molecule, dealing them to Handok. In general, blocking this particular cellular cascade is an area of great interest to pharmas looking to extend their oncology franchises, with developers of inhibitors specifically targetting PI3K striking rich deals. (Think Gilead/Calistoga or Sanofi-Aventis/Exelixis.) Deal terms for Akt inhibitors don’t appear to be as pricey based on Elsevier’s Strategic Transcations database. Of course, because Aeterna Zentaris out-licensed the highly valuable North American rights to perifosine at Phase I, it’s also limited the upfront potential dollars it could receive, demonstrating the trade-offs companies make when partnering at such an early stage. --EFL

Image courtesy of flickrer ideowl used with permission through a creative commons license.

DOTW: Santa Baby Edition

Santa baby, slip an NDA under the tree for me,
It’s been such a transformative year
Santa baby, so hurry down the chimney tonight.

Santa baby, we’ll take some convertible debt – I bet
We’ll roll it into a Series B before long
Santa baby, so hurry down the chimney tonight

Think of all the M&As!
Are IPOs a choice for biotech pure-plays?
Next year, the milestones will come
An exit by earnout, baby, that’s the new way.

Santa baby, our ex-US rights we’ll shop, you’ll drop
Cash upfront plus biobucks
Santa baby, so hurry down the chimney tonight!



IN VIVO Blog's Deals of the Week crew wishes you a happy and healthy 2011. In the meantime, sign your X on the line just like Eartha says, and point your sleigh toward...

Pfizer / Lpath: If you're on an L-path, and you cross two bridges, you arrive at Pfizer. That's this week's DOTW Zen koan. First, grasshopper, the deal: Pfizer paid the San Diego biotech $14 million for an option for worldwide rights to its Phase I wet AMD antibody Isonep, and it will split costs of upcoming Phase Ib and IIa trials. Pfizer will then have an undisclosed period of time to decide if it wants to fully take over Isonep. If it does, it will pay an undisclosed option fee, plus milestones up to $497.5 million and tiered double-digit sales royalties. Pfizer also gets a time-limited right of first refusal to another antibody Asonep, which Lpath plans to move into a pair of Phase IIa trials next year. During a call Dec. 21, Lpath CEO Scott Pancoast said Pfizer would have roughly two to three years to decide whether it wants to acquire the cancer candidate. Oh, the bridges? The first was a National Cancer Institute "Bridge" grant Lpath received in 2009, a new form of small-business grant to help life science companies make headway on translational projects and reach the clinic. The second was a $5 million private placement (7 million shares at 70 cents each) Lpath announced in November. Each investor also got two-year warrants to buy half again as many shares as they bought in the placement. Lpath's closing share price Dec. 22 was $1.02. -- Alex Lash

Biogen/Neurimmune: Neurimmune received its Christmas present early this year, but will investors? On Dec. 21 came news the Swiss biotech was selling three preclinical neurodegenerative programs to Biogen Idec for $32.5 million upfront and another $395 million in milestone payments. As part of the deal Biogen takes on responsibility for all further development—and importantly cost—for the compounds, which target the neurotoxic proteins alpha-synuclein, tau, and TDP-43. If Biogen seems enamored with Neurimmune’s proprietary Reverse Translational Medicine platform (this is the second time its inked a deal with Neurimmune), it’s a sure bet the biotech’s founders, Karsten Henco and Edward Stuart of HS Life Sciences aren’t complaining. The two gentlemen staked the company with $6 million nearly four years ago, and haven’t had to put in another dime, letting the partnerships fund the company’s growth. (Now that’s capital efficiency.) IN VIVO couldn’t determine if Neurimmune will pull a Knopp and return cash to Messieurs Henco and Stuart, but, by itself, the Dec. 21 upfront would seem to yield a tidy exit. Meantime, the deal is in keeping with Biogen Idec’s strategy of “focused diversification,” pretty words suggesting the company’s desire to amass capacity in areas closely related to its historical strength in multiple sclerosis. Alas, the very early nature of Neuroimmune assets means they can’t do anything to help Biogen, which is overly dependent on franchise products Avonex and Tysabri, from a revenue stand point. The need for additional marketed or very late stage clinical products suggests Biogen, which is in the process of hiring a new head of corporate development, could be on the prowl for bigger deals. It would be good to start 2011 off with a strong DOTY candidate, wouldn’t it?—Ellen Licking

GlaxoSmithKline/Proximagen: Santa baby, just slip an alpha-7 nicotinic acetylcholine receptor modulator under the tree for me. (Okay, so the rhyme scheme doesn’t really work.) We interrupt Santa’s mad dash around the globe to report a big pharma out-licensing event. Despite all the highfalutin talk about the need to balance the internal R&D spend with financing from external partners, big pharmas haven’t really demonstrated a willingness to out-license. GlaxoSmithKline, which spun out two investigational pain products into a new CNS company called Convergence Pharmaceuticals earlier this year, is one notable exception. This week comes news it’s out-licensing two development programs targeting cognition disorders and Parkinson’s disease to the British biotech Proximagen. Even though GSK notified the biopharma community in February that it was exiting certain CNS areas like depression, anxiety, and pain, it sounds like the asset transfer wasn’t for the faint of heart. According to “The Pink Sheet” DAILY, it still took nearly a year for Proximagen to get the compounds, which are positive allosteric modulators of the alpha-7 nicotinic acetylcholine and dopamine D1 receptors, out of the big pharma.Financial terms of the deal weren’t disclosed.--EL

Sanofi/Ascendis: Sanofi continues its bid to become an end-to-end player in the diabetes space, inking a drug delivery deal this week with specialty player Ascendis Pharma. The global licensing and patent transfer agreement gives Sanofi access to Ascendis’TransCon Linker and Hydrogel carrier technology, which are designed to release molecules in the body in a precise, time-controlled fashion without the initial burst and high drug load that can come with other formulations. That would, of course, be a real boon in creating a better version of insulin. Sanofi currently has a lock on the long-acting insulin market with its juggernaut Lantus, but Novo Nordisk is giving the company a run for its money with competitor Degludec. Formulation changes to improve Lantus’ delivery would be one means of extending the life cycle of one of Sanofi’s most important products—and the only one not facing near-term patent expiration. The strategy also borrows a page out of Novo’s playbook. The Danish firm has used a strategy of incremental large molecule innovation to build its dominant position in insulin.--EL

Pfizer/Phylogica: Australian peptide drug discovery specialist Phylogica has struck its third licensing deal in the past year, agreeing to allow Pfizer to discover peptide-based vaccines using its proprietary platform. Pfizer will pay just $500,000 upfront for the license, but downstream payments, options and royalties of undisclosed size could potentially drive the deal’s value as high as $134 million. Founded in 2001, the Perth-based company has also signed separate licensing agreements with Roche and AstraZeneca’s Medimmune subsidiary. The Roche deal covers a mechanism allowing large molecules to attack disease targets inside of cells, while the MedImmune deal addresses antimicrobial peptides that attack the Gram-negative bacterium Pseudomonas aeruginosa. The latter deal, revealed in August 2010, includes a small upfront commitment of just $750,000 plus a 12-month commitment that will double that amount.—PB

Gilead/Arresto: Gilead Sciences took a step beyond its traditional focus in infectious disease by acquiring Palo Alto, CA-based Arresto Biosciences, which is developing disease-modifying drugs that target extracellular enzymes to treat fibrotic disease and cancer. The deal’s price tag is a robust $225 million and includes potential earn-outs; that’s striking in a period when pharmas have shown a greater interest in alliances than acquisitions and is also notable given the development stage of Arresto’s assets. Arresto’s lead candidate is a Phase I drug for idiopathic pulmonary fibrosis, a condition in which the lungs become scarred for unknown reasons. If approved, its compound AB0024 would be the first biologic drug for the condition, currently treated only through lung transplants. This is an area Gilead knows well, having spent considerable time trying to develop its own medicine in the space, Letairis (ambrisentan). Did Saint Nick arrive with the Arresto acquisition in the nick of time? On Dec. 22, after the market’s close, Gilead announced it was scuppering development of Phase III Letairis, which only slows disease progression but doesn’t address its root cause. Arresto, which is three years old has raised an undisclosed amount from a syndicate of backers including Kleiner Perkins Caufield & Byers, HealthCare Ventures, Northgate Capital, DAG Ventures, and Abbott Biotech Ventures.--PB


Pfizer / Adolor: The name is supposed to mean "without pain," but after this week you could read it with a melancholy sigh: Ah, dolor. In its latest setback, Adolor said in a regulatory filing Dec. 21 Pfizer would sever ties three years after it licensed rights to two of Adolor's pain programs, ADL5859 and ADL5747. The termination is effective March 2011. Pfizer said during its R&D day Sept. 27 that '5859 was among several drugs it was dropping from its pipeline, but there was no mention of '5747. Still, the writing has been on the wall since June, when the companies reported disappointing Phase IIa results for both delta opioid receptor programs in osteoarthritis. Neither drug performed better than placebo. Originally signed in December 2007, the deal called for $30 million upfront, nearly $2 million in immediate R&D reimbursement, and up to $232.5 million in milestones for the two programs. The first payment was due at the start of Phase IIb trials. Adolor was responsible for development through Phase IIa, and in for the US market could look forward to a reasonable split of costs and revenues -- 60% for Pfizer, 40% for Adolor -- plus a co-promote option. For the rest of the world, Pfizer had full rights, with sales royalties going to Adolor. – AL

AstraZeneca/Abbott Laboratories: Nothing like burying bad news in the slow days ahead of a holiday. Abbott and partner AZ, which hasn’t had much good news to report recently, announced Dec. 22 that they have decided to discontinue the development of Certriad (rosuvastatin calcium and fenofibric acid), and will unwind their licensing and co-development agreement in January 2011. Certriad is a combination pill that brings together AstraZeneca's statin Crestor and Abbott's fibrate TriLipix and is meant to lower bad cholesterol and improve good cholesterol in patients at risk of heart disease. The companies said the decision was made “after careful review and consideration” of the “complete response” that was handed down by FDA in March 2010. Little information about the complete response was given to shareholders at the time of its issue, but analysts at Leerink Swan speculated a “worst-case scenario in which the FDA might require more long-term data” was a possibility. Adding credence to this assertion, AstraZeneca said in its Dec. 22 statement that “development of Certriad is no longer commercially attractive.”—Lisa LaMotta

Synagis' Special Status Under Health Care Reform

It is every marketer's dream to have a product that is in a class by itself.

AstraZeneca/MedImmune's respiratory syncytial therapy Synagis (pavilizumab) can claim that distinction in an entirely new way as the Centers for Medicare & Medicaid Services implements new rebate provisions for the Medicaid prescription drug program under the Affordable Care Act: Synagis is the only drug that will benefit from a new, lower mandatory rebate on drugs that are "approved by the Food & Drug Administration exclusively for pediatric indications."

Recall that the health care reform law raised the minimum Medicaid rebate percentage from 15.1% to 23.1% for most brand name drugs. But the law sets a lower rebate amount (17.1%) for two classes of drugs : clotting factors and pediatric-only drugs. (For a complete analysis of the Medicaid rebate changes, see here.)

If that isn't complicated enough, the new rebate amounts were effective retroactively to Jan. 1 (the law was signed at the end of March), but CMS didn't provide any guidance on which products were covered until now.

For clotting factors, the list of covered products was pretty simple, since the new rebate provision specifically cites products that already receive a separate furnishing payment from Medicaid. So that list of affected drugs is no surprise. (Manufacturers who benefit include Bayer, Aventis Behring, CSL Behring, Novo Nordisk, Baxter, Talecris, Grifols and Pfizer/Wyeth).

But it was by no means clear what products were covered by the "pediatric-only" exemption. Now we know: Synagis. (The official "list" is here.)

It turns out that Synagis is the only product approved by FDA all of whose indications are explicitly limited to pediatric use (from birth to age 16). That, at least, is what CMS determined. (The agency does invite anyone who is "aware of other drugs that meet the pediatric definition specified" by CMS to email mdroperations@cms.hhs.gov .)

We note with amusement that CMS' explanation of how it came up with the "list" runs a full page. For that matter, the section of the law that CMS is interpreting [Sec. 1927(c)(1)(B)(iii)(II)(bb) for all you Medicaid rebate wonks] is longer than the list of covered drugs. Wouldn't it have been easier just to say "the minimum rebate on Synagis is 17.1%?"

Okay, that's not how legislation works. And we suspect AstraZeneca is just as happy that the provision flew beneath the radar screen a bit; there is enough controversy about the pharmaceutical industry's "deal" on health care reform--a deal, we might add, negotiated by the Pharmaceutical Research & Manufacturers of America when it was chaired by David Brennan, CEO of AstraZeneca.

But a bit of perspective here. We assume AZ is pleased that the minimum rebate on Synagis is lower than for most brands, but it is not like AZ will reap some kind of windfall as a result.

First, the new minimum rebate is still two percentage points higher than the old 15.1% minimum rebate. According to MedImmune's 2006 10K filing (the last filed by the firm before it was acquired by AZ), every percentage point increase in Medicaid rebate liability translates into roughly an $11 million hit to sales for the brand.

Then there is the separate provision of the health care reform law extending Medicaid rebates to managed care plans. While that affects a relatively small segment of the overall Medicaid prescription drug market, the impact per unit sold is large (in this case, no rebate to 17.1% minimum).

Last but not least, there is a provision in the new rebate rules that attempts to recoup rebates on new formulations of products. The idea is that, if a sponsor changes a formulation and sets a new price point, it should still pay the same amount in rebates (or more) as it did under the old formulation.

We think that provision affects Synagis as well, since (as MedImmune disclosed in the 2006 10K filing), "during the fourth quarter of 2005, we successfully transitioned to the liquid formulation of Synagis in the US from the lyophilized formulation, which has resulted in a reduction in allowances for government rebates and an increase in net realized price during 2006."

That provision, however, is even less clearly defined in statute than the pediatric-only rebate--and CMS hasn't issued guidance on interpreting it yet. (We've written about the line-extension rebate in The RPM Report, here.)

So, net-net, AZ is paying much higher rebates on Synagis than it would have without health care reform. But, thanks to its special treatment under the law, they aren't quite as high as they might have been.