Preparing for the CATT Study: Will Makena Controversy Have an Impact?

The first public presentation of data from the National Eye Institute’s head-to-head study of Lucentis vs. Avastin in macular degeneration will take place this weekend. The Comparison of Age-Related Macular Degeneration Treatments Trial (CATT) is sure to go down as an early landmark in the era of comparative effectiveness research—though exactly how it will be remembered is less clear.

We have written extensively about the unusual situation Genentech faces with the CATT trial—basically a government run study designed to prove that one Genentech product (Avastin) is just as good as another (Lucentis) at a vastly lower cost. The study was initiated and designed completely without Genentech’s help, prompted by outrage among providers who had been using Avastin off-label for AMD who experienced sticker shock when Lucentis was launched at a price of about $1,500 per dose, compared to $50 for the unapproved, microdose of Avastin.

It took a very long time to get the study off the ground, thanks in part to a series of administrative hurdles posed by the unusual circumstance of conducting a study in the Medicare population without the support of a willing sponsor. The planning for the trial began in 2005, but it didn’t really get going until 2008.

Now, at least, it is wrapping up—and in a juicy irony the study results will be reported right on the heels of a completely different controversy over an attempt by a sponsor to sell a product at $1,500 a dose to providers comfortably using an unapproved alternative that costs about $50 a dose. That, after all, describes the situation with KV Pharmaceuticals’ pre-term labor drug Makena.

The situations aren’t perfect parallels of course. KV launched Makena earlier this year, becoming the latest sponsor to pursue a strategy of obtaining FDA approval for a widely used unapproved medicine, in this case, the pharmacy-compounded ingredient 17P. Makena received an Orphan Drug designation, the only exclusivity KV can count on since the active ingredient is long off-patent. The application itself was an abbreviated one, referencing clinical studies conducted by the National Institutes of Health demonstrating a benefit in delaying pre-term labor in high risk women. (Though the NIH study wasn’t enough for a full approval; Makena received an accelerated approval with the sponsor committing to demonstrating a clinical benefit in the health of newborns.)

Lucentis feels very different. The active ingredient is a modified version of the monoclonal antibody known as Avastin, optimized (Genentech says) for use in the eye. Avastin itself is high science, the quintessential biotech breakthrough, an angiogensis inhibitor whose benefits were demonstrated at high cost and high risk by Genentech.

But the controversy around the two therapies is essentially the same: providers reacted to a de facto 3,000% price increase by complaining to anyone who would listen. Congress took note and pushed federal agencies to respond.

The nature of those responses has been very different. For ophthalmologists, use of Avastin is now common practice, especially for uninsured patients or in any circumstance where securing reimbursement for Lucentis may be in doubt. And the CATT study is supposed to help preserve the status quo by demonstrating non-inferiority between the two treatments.

For Makena, the key response came from FDA, which announced March 30 that it would not clamp down on compounders who continue to make 17P. (You can read more in “The Pink Sheet,” here.)

That simple action, coupled with CMS’ same day “reminder” to state Medicaid directors that they can continue to pay for compounded 17P if they choose, dramatically changes the commercial picture for KV, and the company reacted by slashing its price. The rest of the story has yet to be written, but we suspect KV will ultimately drive compounders out of the market and that will be that.

But the considerable attention generated by Makena should mean that the CATT study will garner even more interest than it already commands.

The question is, exactly what will that interest lead to?

That is where another connection to Makena comes into play: the question of how safe it is to use unapproved alternatives to an FDA approved therapy. Roche/Genentech has stressed that issue as a key concern with off-label use of Avastin all along, and the company sponsored a review of Medicare claims data that suggests there are indeed more adverse outcomes associated with that use than with Lucentis.

And recent comments by Center for Drug Evaluation & Research Director Janet Woodcock about the Makena controversy may shed light on how FDA views the issue.

Woodcock spoke at the Food & Drug Law Institute annual meeting in early April, less than a week after FDA issued the public statement on compounding and Makena.

It was therefore inevitable that she would be asked about the issue. Inevitable, and also a bit unfair. The controversy over Makena is clearly a political issue, with Ohio Democratic Senator Sherrod Brown spearheading an all out campaign for federal agencies to do something to address what he (and plenty of provider groups) felt was an outrageously high price for the drug. So FDA’s announcement that it would not clamp down on compounding of Makena clearly began at a level much higher than the CDER director.

Moreover, any drug regulator is bound to feel strongly that an FDA-approved product is safer than a pharmacy compounded product. Woodcock, who has devoted considerable energy to upgrading quality control in (regulated) pharmaceutical manufacturing, probably has stronger feelings on that score than most.

But it is Woodcock’s job to defend agency policy, and defend it she did.

She began by stressing the importance of placing the issue in the context of conflicting societal pressures. In the case of Makena, Woodcock suggested, the agency’s decision aimed to find that balance. In its March 30 public statement, FDA stressed the “unique” circumstances surrounding Makena, underscored the importance of assuring sterility in the injectable product, and noted that FDA may revisit its enforcement discretion at any time.

“We want a lot of things as Americans,” Woodcock noted. “We want orphan incentives. We definitely want people to study drugs in pregnant women, which they don’t do. We want affordable drugs. We want high quality parentals that are not contaminated with bacteria and killing people.”

“Sometimes all these wants conflict with each other. The question is, with all these different societal desires, how do we define a balance amongst them?”

Moderator Daniel Kracov (Arnold & Porter) suggested that the issue is whether it is appropriate for FDA to “play that role” of arbitrating among those competing desires.

Woodcock responded by stressing the limits on FDA’s ability to regulate compounding—not just questions about the scope of its authority, but practical limitations on its resources.

“In general, our enforcement policy on compounding has been that we are taking a risk-based approach and we are going after compounders that are having contaminated drugs.” She cited a recent outbreak of septic meningitis associated with total parenteral nutrition compounded by a pharmacy in Alabama. (Coincidentally, FDA issued a safety alert tied to that outbreak on March 30, the same day it announced its Makena policy.)

In addition to focusing on cases of contamination, “we will also go after serious health fraud,” like if a pharmacy is offering some substance as a replacement for insulin. “We have the risk-based approach down from that, but those are the primary objectives right now in compounding, because we have many many tasks that we have to enforce against.”

Panelist Nancy Buc (who recently retired as a partner at Buc & Beardsley) pressed Woodcock, noting that her own priority lists highlights injectable products as a priority. “One of the things that Makena brings us is GMPs and presumably sterility. Are you going to inspect the people who are compounding more than one dose for sterility?”

“I would ask you are we going to inspect people who are compounding drugs that are injected directly into the epidural space, or into the cerebral spinal fluid,” Woodcock responded.

“There are many concerns here. There are many, many compounded drugs that are intravenous. That poses a higher risk than the intramuscular injection” that is used for Makena and 17P compounds. “If you start talking about risk, I think there is a hierarchy. The greatest concern to me would be drugs injected into the eye, or into the central nervous system. Next would be drugs that are injected intravenously…then would be drugs that are injected intramuscularly.”

That’s right: drugs injected into the eye are the highest risk in the CDER directors view.

Was the CATT study already on her mind? Not really. “I wasn't thinking of Avastin in particular,” Woodcock told us when we contacted her about her remarks.

In fact, “I believe the division of Avastin vials is considered repackaging not compounding.”

“However,” Woodcock stressed, “I believe injection in or near the CNS is one of the highest risk situations for sterility problems.”

When weighing the impact of the CATT study findings, it seems safe to say that whatever impact they have, it won’t result in FDA issuing a statement saying it has no problems with widespread off-label use of Avastin.

DOTW: Biogen Deal Means Sunshine and Rainbows For Knopp Investors

It's tough times for biotech investors, not much disagreement there. But in covering one of the deals of the week, we found a bright spot. The deal was Biogen Idec's purchase of rights to Knopp Neurosciences' Phase II ALS treatment for $80 million upfront, a sum comprised of a $20 million license fee and $60 million for equity in the privately-held Pittsburgh firm.

Knopp told our Pink Sheet colleagues that the $80 million was in essence more than it needed for its ongoing operations. Its lead drug, KNS-760704 for ALS (also known as Lou Gehrig's disease -- although a new study questions whether Gehrig had his eponymous disease or something else) is now in Biogen's hands, and the smaller firm is back to discovery work.

Instead of squirreling away the extra cash for a rainy day, however, Knopp gave it back to its investors, which are a mix of low-profile institutional investors, angels and family foundations. "Ah!" we thought, our little reptilian deal-brains churning, "An exit via license! How exotic!"

But no. The investors who got the distribution kept all their equity. Every last dime, according to Tom Petzinger, a former Wall Street Journal-ist who runs the firm's business development and public affairs. It wasn't an exit, and it wasn't a share buyback (or a private version thereof). Nor did shareholders sell to Biogen, whose $60 million equity purchase was from the company itself. It was, basically, a one-off dividend, or as Petzinger put it, "taking care of our investors."

Indeed, it was a case of Knopp saying this is your money, not ours. Petzinger said there was no quid pro quo, either. If and when Knopp finds itself in need of cash, the investors are under no obligation to re-up.

But he and the rest of management like to think that their gesture today will create investor goodwill in the future. "It might be a highly unusual move, but it doesn't mean it's not highly appropriate or strategic," Petzinger said.

Imagine that: a biopharmceutical startup in 2010 happily giving up cash that, for now, it doesn't need.

by Alex Lash

Medco/United BioSource: Any doubts about the importance of outcomes-based research in the post-health care reform era, look no further than Medco’s August 16 announcement that it plans to acquire the Bethesda, Md-based information services company United BioSource Corp. (UBC) for $730 million. The tie-up gives the pharmacy benefit manager a new business capability--drug outcomes based research for biopharma companies--that's likely to be a valuable service in the comparative effectiveness era in which we now reside. Among other things, UBC is the market leader in designing and conducting risk evaluation and mitigation strategies (REMS) for new medicines. UBC says it has been involved in the design, implementation and/or assessment of more than 60 REMS and predecessor programs, known as risk minimization action plans. In addition to safety and risk management, UBC focuses on health economics and outcomes research, including drug cost-benefit and cost-effectiveness analyses. UBC also brings Medco the capacity to conduct post-approval research in Europe and Japan. Medco's deal with UBC is more strategic in nature than recent moves by CVS Caremark and Express Scripts, PBMs which have aimed to add volume by acquiring large chunks of business from insurers. In July, CVS Caremark announced a 12-year contract with Aetna to manage duties previously handled by the insurer's internal PBM covering 9.7 million plan members. That followed Express Scripts' outright purchase of WellPoint's internal PBM, NextRx, which handles pharmacy benefits for about 25 million.—Cathy Kelly

Aspen/Sigma: The beleaguered Australian-based health care firm Sigma finally bought its way out of a jam, inking a deal this week with South Africa-based Aspen Pharmacare. Under the terms of the deal, Sigma, which is the largest pharmaceutical manufacturer by volume in Australia, will sell its its pharmaceutical group to Africa’s largest drugmaker for 900 million Australian dollars ($811 million). In hiving off the branded and generics drug unit and its most profitable division, Sigma will once again become a wholesale distributor; it will also be able to retire its total debt burden of A$785 million ($654 million). Sigma ran into trouble after spending $2.2 billion to acquire generics maker Arrow in 2005, with write-downs associated with that transaction resulting in a A$389 million loss for the 12 months to January 31, 2010. Interestingly, even though Aspen already has operations in Australia, the company has also commited to a long-term supply, distribution and logistics agreement with Sigma. According to sister publication PharmAsia News, opinions about the deal’s value vary, in part because the continued relationship between the two companies carries execution risks for Aspen. There are risks for Sigma as well, including whether the Aussie company’s new CEO Mark Hooper can find growth in a generics-free company. —Daniel Poppy

BioMarin/ZyStor Therapeutics: In a move to bolster its orphan drug pipeline, BioMarin Pharmaceutical has acquired enzyme replacement specialist ZyStor Therapeutics of Milwaukee for up to $115 million in upfront and milestone payments. As with many recent buyouts of private startups, the deal is back-end loaded, with a modest upfront payment of $22 million plus a $93 million earn-out. As part of the deal, announced August 17, BioMarin gets ZyStor's ZC-701, a novel therapy to treat the inherited enzyme deficiency Pompe disease, as well as a platform to create additional future enzyme replacement therapies. BioMarin says ZC-701 features a faster development timeline and lower projected development costs than its in-house candidate for Pompe disease, BMN-103. (Both compounds are in pre-clinical development.) The deal illustrates the new math currently in operation at many venture-backed companies. In order to advance ZC-701 through proof-of-concept, ZyStor would have had to raise a much larger round of capital; instead ZyStor’s backers, chiefly a syndicate of Midwestern venture firms, chose to sell. Given the $22 million upfront, ZyStor investors got their money back, but only just. The step-up multiple was a meager 1.5x, meaning the deal value was only 50% more than the amount of cash raised privately. Add in the earn-out, and the multiple could rise to 7.9x, higher than the average return for private biotechs acquired in 2009. Alas, BioMarin wouldn't discuss the duration of the earn-out or the timing of specific milestones, except to say that one $13 million payment will be made when the first patient is enrolled in ZC-701's Phase III trials.—Paul Bonanos

Novartis/Quark: Novartis has agreed to pay Quark Pharmaceuticals $10 million for the option to later in-license QPI-1002, a systemically delivered synthetic siRNA currently in Phase II for prevention of acute kidney injury in patients undergoing major cardiovascular surgery and for prophylaxis of delayed graft function in patients receiving kidney transplants. The companies revealed few details of the Aug. 18 agreement. The exercise fee and milestones for '1002 could reach $670 million but Quark CEO Daniel Zurr was not able to break down those biobucks more specifically or say when Novartis' option kicks in. Of course there are royalties on net sales too--if a drug ever reaches the market. In an interview with The Pink Sheet DAILY Zurr could only say he was "quite happy" with the royalty rate. (Gives you the warm fuzzies doesn't it?) Also left unanswered is what this week's tie-up means for Novartis' ongoing collaboration with Alnylam, under which the two companies are developing RNAi candidates in a variety of therapeutic areas. Originally a three-year agreement, Novartis has extended the Alnylam partnership twice for one year, with a termination date coming in October. At that time, Novartis will have to decide whether to non-exclusively license the Alnylam platform and further increase its ownership stake in the RNAi pioneer.--Joseph Haas

Life Technologies/Ion Torrent: This week’s acquisition of Ion Torrent by Life Technologies, for $375 million in cash and stock, continues the flurry of recent activity among gene sequencing instrument providers, who are continuing their march into the next generation of technological innovation. Seven weeks ago, Roche’s 454 Life Sciences bought up rights to IBM’s nanopore-based single molecule sequencing program, and just before that, Pacific Biosciences aligned itself with Gen-Probe. PacBio subsequently completed a $109 million Series F, including $50 million from Gen-Probe, and this week it also announced an IPO filing. Another player, Complete Genomics, filed for an IPO at the end of July and also just raised $39 million in a Series E. Did someone say “Building a war chest?” Unlike its more visible competitors, Ion Torrent’s Personal Genome Machine (PGM), which should hit the market in 2010 and sell for less than $100,000, is still kind of a black box: its capabilities are largely unknown. The heart of the PGM is a novel chemical detection system that directly measures the change in pH after a nucleotide incorporates into target DNA, using what is basically a semiconductor chip layered with an ion sensor. The company, founded by 454’s founder Jonathan Rothberg, gave a splashy demonstration of its machine at the February 2010 Advances in Genome Biology and Technology meeting on Marco Island. But it has not provided specs for the PGM, nor has there been any public third-party validation of the system from early access users. Nonetheless, because of the PGM’s novel detection system and semiconductor-based manufacturing, Ion Torrent has created quite a buzz, fueled in part by its LeBronian unveiling at Marco Island. Unlike PacBio and Complete Genomics, for example, which use optical detection, Ion Torrent could create a different set of users for gene sequencing. “For reasons of cost and footprint, I think that chemical detection-based sequencers can extend toward the clinical setting,” says Leerink Swann director of research, John Sullivan. That said, according to Life Technologies, the initial application for the PGM will be the life sciences [research] market.—Mark Ratner

Abbott/SkyePharma: Back in January FDA declined to approve Skye’s Flutiform fixed-dose combination asthma product, instead issuing a complete response letter. After a June meeting with the agency it became clear the companies would need to conduct additional clinical trials. On August 20 the other shoe dropped, with Abbott backing out of the Flutiform deal (one originally signed by Kos back in 2006 for $25 million up-front and renegotiated slightly by Abbott in 2008), penalty free. Skye hasn’t given up on the project, according to a statement, but won’t be taking home a break-up fee to keep it warm during those cold English summer nights, either. The therapy remains under review in Europe, where--perhaps luckily for Skye--“the regulatory approach is different from the United States,” the release notes. If Skye sees a path forward in the US it’ll try to sign up another marketing partner. For now, nobody seems surprised by Abbott’s decision – yet SkyePharma’s shares still slid 5% on the news.--Chris Morrison

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

Musical Chairs on CER: Industry Picks in Tune, But Who Will Represent Government?

There is plenty of interest in industry in the question of who, exactly, will be overseeing the launch of a new federal comparative effectiveness research effort in the US.

Under the health care reform law, that effort will be overseen by a public/private partnership called the Patient-Centered Outcomes Research Institute.

With the June 30 nomination deadline past, it turns out that the pharmaceutical industry's two biggest trade associations--the Biotechnology Industry Organization and the Pharmaceutical Research & Manufacturers of America--are on more-or-less the same page when it comes to who should serve.

As we report in "The Pink Sheet" DAILY, bio and PhRMA each nominated the same four candidates, with bio's slate including two additional choices to serve on the board of governors of PCORI.

Of course, they won't all get seats: by law, PCORI will have three industry reps, and they are supposed to represent the pharmaceutical, biotech and device sectors. So figure on two of the six PhRMA/bio nominees actually getting seats.

The choice, incidentally, is to be made by the Comptroller General of the US, otherwise known as the head of the Government Accountability Office. That is currently Gene Dodaro, who has been acting CG since David Walker stepped down in March 2008. Congress is supposed to send a bipartisan list of nominees to the President for selection of a successor--but Congress couldn't agree on a list and now it isn't clear when or if Obama will pick a permanent head. That should make everyone in bio and PhRMA proud that they were able to agree on a relatively short list of nominees.

Settling on the industry reps will be fun, but there is an even more interesting choice to be made in rounding out the board of governors.

PCORI's 19 member board has only four slots reserved for government officials, and two of those are filled by statute (National Institutes of Health Director Francis Collins and Agency for Healthcare Research & Quality Administrator Carolyn Clancy). That leaves only two open slots for the board--and way more than two interested government agencies.

Remember: the Federal Coordinating Council for Comparative Effectiveness Resarch that was formed a year ago had 15 representatives, all from government. The FCC was dissolved upon enactment of the health care reform law. That means that when the music stops, 11 members of that team will not have seats on the PCORI board.

Who gets the two vacant seats for government agencies? Easy. The Food & Drug Administration and the Centers for Medicare & Medicaid Services, right?

Not so fast. We are hearing that the Department of Veteran's Affairs is sure to take one of the slots. That may not be intuitively obvious to us regulatory-centric types, but it is perfectly logical: VA operates a massive, fully integrated health care system and claims to have pioneered the field of CER.

So that leaves one slot open, and 10 people still standing. Should be an interesting choice....