The Big Red Biotech Blog

Takeda Extends ADC Deal with Seattle Genetics

Takeda's Millenium group has decided to go for another target in partnership with Seattle Genetics utilizing the latters ADC technology.  Millenium currently partners with SeaGen on SGN-35 or brentuximab vedotin for the treatment of Hodgkin's lymphoma. 

SGN-35 is an antibody drug conjugate or so-called "empowered antibody".  The antibody specifically targets the intended cancer cell with a coupled toxic compound to be delivered to kill that cell. SeaGen's SGN-35 and Genetech's T-DM1 both seek to be the first licensed ADC's and there is a lot of excitement for these technologies.

SeaGen says that it now has 10 collaborations on ADC projects and has generated more than $150 M in licensing fees to date -- with more milestones lingering out there as they products make it to market.  There are 11 ADCs in clinical development using Seattle Genetics technology. The latest Takeda extension validates the growing interest in the technology.  See Xconomy Seattle and Fierce Biotech.

 

Posted by Bruce Lehr March 15th 2011.

Novartis Jacked Up about Jak Inhibitor Results

As reported in Fierce Biotech, Novartis and its partner Incyte have reported the second set of positive phase III results with its Jak Inhibitor drug, INC424 or ruxolitinib, for the treatment of myelofibrosis.  The companies plan to file a 2nd Qtr NDA with the idea of launching later in 2011.

Novartis paid Incyte $150 million upfront with an agreement for milestones that could reach as much as $1 billion. Novartis would like to get the Jak Inhibitor licensed for this rare blood cancer -- but its real goal would then be able to achieve licenses for additional applications, including rheumatoid arthritis. Pfizer has a similar drug, tofacitinib, aimed at the RA target.

 

Posted by Bruce Lehr March 15th 2011.

When is bigger Pharma not better Pharma?

According to In the Pipeline - when it's Pfizer.  And likely most other Big Pharma companies too.  As posted here yesterday, Pfizer intends to cut back to its "innovative core" by spinning off it non-Pharma divisions. This will allow it to concentrate on the drug business.  Now -- can Pfizer be successful doing that?

It seems most analysts and pundits woudl like to see them give it a shot -- as what they have been doing is thrilling no one.

 

 

Posted by Bruce Lehr March 15th 2011.

FDA Official: Another Tainted Drug Is Inevitable

The statistics are there in black and white.  In 2001, there were roughly 1200 foreign manufacturing plants for pharmaceuticals.  In 2008, there were 3500.  That's an 185% increase.  The FDA increased its inspections by 23% but that only led to a 57% decrease in the foreign plant inspection rate.

FDA Official: Another Tainted Drug Is Inevitable // Pharmalot.

What to do about it?  The FDA is touting a 4 point plan.  The plan calls for the following:

• Partnering with foreign counterparts to creat a global coalition of regulators
• Building a global data information system
• Improve intelligence gathering and focus more on risk analytics
• Tap both public and private sources - like foreign regulators

Some of this process has begun for years now according to deputy FDA commissioner John Taylor,  but the efforts need to be stepped up. In meantime, he said "another pubic health crisis like Heparin seems inevitable." Not a cheery thought.

 

 

 

Posted by Bruce Lehr March 15th 2011.

RNAi Patent Litigation Settled Among Key Players

Unlike the NFL so far, all the key players in the RNAi field got together and worked it out. 

The deal between Alnylam, Max Planck Society, UMass, and the Whitehead Institute and MIT concerns the prosecutio and disposition of the Tuschl I and Tuschl II patents.

Alnylam, UMass, and Others Settle RNAi Patent Litigation.

Max Planck will take the lead role in coordinating all prosecution of the Tuschl II family of patents worldwide.  UMass will lead prosecution of Tuschl I patents outside the US, and will sublicense TuschI II patents to Merck with permission from Alnylam.  Alnylam will receive a portion ofthe licensing fees.

Alnylam can focus on its drug programs for RSV, liver cancers, and Huntington's disease.  Max Planck will worry about the patent prosecution of TuschI II. Everyone seems happier for the experience.

 

Posted by Bruce Lehr March 15th 2011.

Pfizer Breaks Up to be More like Eli Lilly?

I was struck by several articles (see WSJ, Pharmalot, Fierce Biotech) today talking about Pfizer's contemplated sell off, spin-out, break up to become a smaller more focused company.  The idea is that it would divest its four non-pharma units - that being nutritionals, consumer health, animal health and Capsugel (capsule making) units.  It could also choose to spin out its "established products" group of off-patent drugs, generics and biosimilars.  This could amount to 40% or more of the current $67 B in revenues. Good idea?  Merck (Medco), BMS (Zimmer & Mead Johnson), Lilly (Guidant) and Abbott (Hospira) have all been cited as positive spin offs.

Presumably, Pfizer would then be able to focus, according to the new CEO, on its "innovative core". [Be The Ball]. This core consisting of its four pharma units - primary care, specialty care, oncology and emerging markets. This would also allow it to cut its R&D spend and apply it to a smaller company.  This may all be a great idea.  The analysts seem enraptured by it at the moment.  However, I was struck by a line I saw in several of the articles stating that Pfizer would then be able to "morph into a pure pharmaceutical research company" like Eli Lilly. Huh?

Has anyone read analyses of Lilly lately?  Particularly relative to their approach to the proverbial patent cliff.  Lilly stands poised to lose approximately 75% of its current revenues from patent expirations within the next 7 years.  It seems to be a foregone conclusion that Lilly will experience revenue drops in 2011 and 2012 at minimum -- before they have any chance to start growing again. Seeking Alpha discusses this.  They note that Lilly hasn't had the best track record of late delivering drugs out of its pipeline despite apparent attractive candidates.  If their revenue continues to fall beyond 2012, they are overvalued according to Seeking.  If they are able to deliver, they are undervalued -- but they need to deliver.

You know what?  Pfizer also has intriguing candidates in its pipeline too.  But it also has an even worse track record than Lilly in getting the darn things out. And when they put their spin-out plan into effect, they will have less diversification to lay off risk -- certainly within this new stand alone pharma business.  There's the rub.  The new model may be very attractive for its potential -- but it will reduce any safety net - and the business will need to deliver out of its pipeline to make it work. That means results need to improve dramatically from the pipeline - with the more focused and leaner R&D spend planned.

 

 

Posted by Bruce Lehr March 14th 2011.

Geo Origin of Biotech's Next Blockbusters

This piece from Xconomy examines where the next generation of biotech blockbusters will come from relative to bio clusters (or elsewhere) in the US.  The article was speculating whether San Francisco would retain its perceived dominant position - you should read the article in full.

The qualifications a molecule needed to meet to be considered, included: completion of a pivotal trial, and have either received FDA approval or are clearly on that path.  The 8 nominees using that criteria:

• Human Genome Sciences' lupus drug (Benlysta)
• Vertex Pharmaceuticals drugs for hepatitis c (telaprevir) and cystic fibrosis (VX-770)
• Dendreon's prostate cancer drug (Provenge)
• Seattle Genetic's rare lymphoma empowered antibody (SGN-35 or brentuximab vedotin)
• Amgen's antibody (denosumab) for osteoporosis (Prolia) and cancer (Xgeva)
• Plexxicon and Roche's melanoma treatment (PLX-4032)
• Genetech/Roche's empowered Herceptin (T-DM1)

That's one from Washington DC, two from Boston, two from Seattle, one from greater LA, and two from the San Francisco bay.  Over and out.

 
Posted by Bruce Lehr March 14th 2011.

Epizyme Cuts Another Cancer Deal

Epizyme closed another pharma deal with Eisai to develop drugs against lymphomas and other cancers.  Epizyme will get $6 million upfront and can earn up to another $200 million in milestones.  The deal gives Eisai access to Epizymes EZH2 epigenetic enzyme targets.

Eisai continues its investment in cancer targets and technologies.  In addition to the EZH2 targe for therapies, Eisai and epizyme plan to produce a companion diagnostic to select patients who will be most responsive to the drugs that are deeveloped. This will be similar to the approach taken with Roche's Herceptin and Plexxikon/Roche's PLX4032. See Xconomy Boston.

 

 

Posted by Bruce Lehr March 13th 2011.

VEGF Trap Clinical Failure for Sanofi & Regeneron

Fierce Biotech reports that Sanofi and Regeneron's drug aflibercept (VEGF trap) for thetreatment of non-small cell lung cancer, used in combination with docataxel, failed to meet its endpoint, extending overall survival, in its latest phase III trial.  It did improve progression-free survival though.  Side effects were significant and 27.2 percent of the treatment group had to leave the trial.  Like most of these failures, the sponsors say they will take a closer look at the data to determine if they can proceed or will stop.

 

 

Posted by Bruce Lehr March 13th 2011.

Will US get Left Behind in Making Biosimilar Rules?

The Biosimilar Blog makes the Biosimlar score:  Europe 14 US 4.

Europe has been out ahead of the US in creating guidelines and a regulatory pathway for biosimilars to reach its market.  They have guidelines in place to cover at least 36 separate marketed biopharmaceutical products and 14 products are already approved.

The US has only 4 approved "biosimilars" - being Omnitrope, Fortical, Hylenex and Glucagen.  None followed a true biosimilar regulatory pathway as there isn't one yet in the US.  The legislation has just passed and the FDA is still in the lengthy process of establishing the regulatory framework for biosimilars to be approved under the new legislation. It appears this will take a while. 

In the meantime, the only way generic recombinant proteins can get licensed is via the generic drug 505(b)(2) pathway.  And this only will be applicable if the drug in question was approved via CDER with an NDA - which normally is used only for small molecules.  Most biopharmaceuticals are approved under a BLA thorough CBER and therfore can't use 505(b)(2).

The authors worry that the US will dicker too long and be left out from being in the forefront of developing biosimilars regulations in the world stage.  Other geographies will lead the way and gain the upper hand in promulgating the regulations and gain experience working on them while the US is still drafting.

The authors plea for US constituencies to stop worrying about protecting innovators by blocking biosimilar competition and worry about creating a pathway whereby biosimilars can be approved --- like the rest of the world is doing.  They further note that there are many other ways to provide innovators with incentives to keep innovating (permanent R&D tax credit anyone?) but that blocking biosimilars shouldn't be one of them.  Let's get in the game.

Posted by Bruce Lehr March 12th 2011.

Wokasch: Why Not Branded Drugs at Generic's Prices?

Mike Wokasch at the Pharma Reform blog note the changing landscape with regard to generics.  Generics now represent more than 70% of the volume of prescriptions written in the US and continues to increase.  He notes that this happens very quickly now as 3rd party payers and the government have placed strong incentives in place to make this happen in a matter of months once a branded drug loses patent protection.

Wokasch further notes that branded makers should be able to sell their product to the market at the lower generic market price than even the generic producers can as they have already made the investment in manufacturing/improvements, supply chain, packaging & distribution, marketing/sales.  All of these expenses by comparison would be new and incremental for a new generic maker of the same drug.  

He asks the provocative question - Why don't branded manufacturers drop their price to generic levels once the patent life is gone?  He argues this would allow them to hold market share.  It would also make it easier on payers and patients if they didn't have to switch drugs they were purchasing or using.  Why not?  In the past, it was likely more of a real dollar and cents issue of profits being eroded too quickly as the generics took a while to take over.  But now, does that still hold?  This conversion takes place in weeks to months. 

The biggest issue, he says, may be that innovators may see this as "throwing in the towel".  To me, to  a large degree it would be an admission that they weren't adding any value once the drug went generic -- and I'm not sure they are.  I think the argument that most or all generic makers produce an inferior product is dubious.  But, I do see a problem with an innovator diluting its brand by going generic under same brand name.  I think it would be necessary to at least form a separate division ala Novartis that uses that name for innovative products and uses its Sandoz division to produce generics. 

I am still of the opinion that for the bulk of the innovators -- most will end up producing generics too as they struggle with their pipelines and financial issues.  Roche may remain an exception -- but will in fact be an EXCEPTION.  Most companies will produce brand name products and generics -- and I think some of the generic producers will cross over the other way and make innovative products too. 

So, I suspect many innovators will adopt some kind of quick conversion generic strategy where they will sell the same drug at lower prices soon after patent expiration.  They will use another brand (company) name for the product (same drug name), and may also segment geographically as to where they sell the generic or perhaps  by end user like government versus private sector. But I think it will happen.

Posted by Bruce Lehr March 12th 2011.

Pharmasset's Hepatitis C Results Rocket Stock

Pharmasset reported results on a [very] small trial with its hepatitis C oral combination therapy with lucrative results to its stock value.  In a test with 16 hepatitis C patients, 15 had their viral load eliminated after only 14 days.

The drugs used in development are called PSI-938 and PSI-7977.  Both are administered via an oral route.  But the really potential excitement for the hepatitis C treatment and patient community is that the combination does NOT require the use of interferon, with its plethora of unpleasant side effects. 

Pharmasset's stock rose by more than 32 percent in a couple of days despite a rather ineffective embargo on the trial result imposed by the European Association for the Study of Liver.  Investors somehow got the news anyhow --- hmmm - I wonder how.

Seeking Alpha points out that this unbridled enthusiasm may be just a tad premature given this result is tantamount to a phase I study with its 16 person patient size.  Investors adopted a "damn the torpedos" attitude without regard to science and reality of larger phase II and III trials (see previous post on Tolerx otelixizumab for example).  The post further points out that previous hepatitis C trials have been afflicted with a phenomenon known as "viral breakthrough" -- when the virus stages a comeback from low-level dormancy as drug resistance develops. 

Thus, while the initial results are promising and surely this therapy should be pursued through the clinic, the jury remains out until larger patient populations are tested.  You may not want to plunk your cash down so early at this stage -- unless you can also afford to lose it.  See Fierce Biotech.

Posted by Bruce Lehr March 12th 2011.

Tolerx - GSK Diabetes Drug Goes Down in Phase III

Tolerx and its partner GSK experienced the agony of defeat when their drug otelixizumab, an anti-CD3 mAb, failed to meet its endpoints in its latest phase III study.  Recruiting for subsequent studies have ben suspended while the data is examined.

The anti-CD3 molecule represented a new approach to try to treat type 1 diabetes by blocking the immune system from attacking insulin producing cells in the pancreas.  After an 8-day course of treatment, the expression of C-peptide (insulin production) was supposed to increase. It didn't happen. 

In 2007, GSK paid Tolerx $70 million upfront, $155 M to support advanced R&D, and could have paid another $350 million in milestones and another $175 million in specific sales milestones.  The whole deal had the potential to be worth $760 million. BTG, a London-based drug developer and orginal licensor of the drug, also was hit negatively by the news.

Now it is back to the drawing board on this diabetes application - and application that Lilly also failed with late last year with its similar drug teplizumab.  Tolerx vows it will stick with other candidates in its pipeline aimed at treating abnormal immune responses. BTG said it would also pursue other autoimmune applications of otelixizumab.

See Fierce Biotech, Xconomy-Boston, and the WSJ.

 

 

Posted by Bruce Lehr March 12th 2011.

Dendreon NJ Factory a "Go" with FDA

As reported in Xconomy, Dendreon has received FDA approval for its new factory in NJ to produce Provenge, its prostate cancer treatment.  The new site will allow Dendreon to quadruple its current capacity.  With the new production levels, Dendreon has forecasted its sales for Provenge in 2011 in the range of $350-$400 million.

 

Posted by Bruce Lehr March 11th 2011.

Fabry Patients Denied March-In Now Sue Under Bayh-Dole

As reported in the Pharmalot blog and the Patent Doc blog, six Fabry patients are now suing Genzyme and Mt. Sinai hospital as individuals and as a class for their failure to provide Fabrazyme to treat their disease.   Previously these patients had asked HHS to exercise march-in rights to find another manufacturer for the product and they have also sued to force thr rationed drug to be sold in the US first before being shipped overseas as the inventions allowing the drug to be made were paid for by US tax dollars. 

C. Allen Black, Jr., who represents the Fabry patients in this case, said in a press release that "for the first time, the courts will be asked to determine whether patients who are guaranteed access to tax-payer funded inventions under the Bayh-Dole act may recover individual damages under the statute when a contractor misuses the invention or withholds it from the public."

Black states further, “It defies belief that, even though US tax dollars paid for the invention of the drug and its development, American citizens are now told that they must suffer and die while paying almost $240,000 a year for a dose of drug that is untested, dangerous, and too low to even help them. Worse, some of my clients were diagnosed after June 2009, so Genzyme simply bans those Americans from receiving any drug at all.”

Fabry patients have requested compensation and punitive damages for lack of adequate treatment and Genzyme's failure to take adequate precautions including keeping a reserve inventory and providing second sources of manufacturing.

Did Your Drug Cost $43 M, $1.32 B or $XX M to Develop?

Tell how much it costs to develop drugs at your company at the Life Sci VC site.  Bruce Booth, a partner at Atlas Venture, established the form to provide information in response to the Slate article highlighting results from Light and Warburton study that estimated median drug development costs at $43 M vs. PhRMA cost estimate of $1.32 B, or Tufts inflation adjusted $1.2 B estimate. What is the real cost?  Maybe we can get a thrid consensus figure from an informed developer population. That is the hope.

I picked this up on Derek Lowe's In the Pipeline site, along with Derek's congratulations to the folks at HGS for getting Benlysta approved.  Derek could not help but note that Benlysta took a wee bit long to make it to the approval column at FDA - having started in 2000 and very likely costing a wee bit more than $43 M to get to market. 

By the way, even in approval, HGS has promised to run some additional trials with African-American populations which presumably are free and not part of developing a drug.

Posted by Bruce Lehr March 10th 2011.

Benlysta Breaks Through with FDA Approval

Unless you have been in a cave today, you shold know that Human Genome Sciences (HGS) and its partner GSK did receive word from the FDA as expected that their new lupus drug, Benlysta (belimumab), has been approved.  This is the first new lupus drug in 56 years - yes - 56 years.  The injectable drug, which will be marketed by Human Genome Sciences and GlaxoSmithKline, is forecast to generate at least $2 billion in annual sales thanks to its $35,000 price tag. 

“Benlysta will remain the only marketed US biologic for lupus for at least the next three years,” Datamonitor analyst Joe Dixon writes in a note. “However, there is competition looming with several Phase III agents in development, including UCB’s epratuzumab.

"It's a very exciting time in lupus," says Richard Furie, a rheumatologist at the North Shore-Long Island Jewish Health System in New York, who has conducted clinical trials of belimumab. "There's an awful lot of activity right now." Several companies have similar drugs in the pipeline, and are likely to be spurred on by belimumab's success, notes Furie. Before 2009, when data from two large, successful clinical trials of belimumab were released, no drug developed for lupus had ever made it through a phase III clinical trial.

Belimumab's success has lessened that stigma, Human Genome Science's vice-president David Stump told investors yesterday: "We have shown with Benlysta that the barriers that have existed for all of these years for drug development in lupus can be overcome."

See more details from Pharmalot blog, NatureNews, Fierce Biotech, and Reuters.

Posted by Bruce Lehr March 10th 2011.

More Gouging Part 2

Here's more commentary and explanation on KV Pharma's new premie-prevention drug, Makena, and the pricing decisions aroudn it.  KV is now also enforcing its rights as an orphan drug provider and it aggressively pursuing cease and desist letters with compounders who would copy (for real cheap) its drug.

In ints defense, KV points out that Makena is FDA approved, unlike products provided by compounders.  It will also save money with its expected treatment course of $27,000-33,000 per patient versus an average cost of $51,000 to treat a premature newborn. Analysts say KV shyold be able to hit $1.1 B in annual sales of the new drug by 2015.

Stories from the WSJ Health blog and the Pharmalot blog.

 

 

 

Posted by Bruce Lehr Mar 10th 2011.

Gouging 101 - KV Pharma Drug Jumps from $20 to $1500

 And if your eye causes you to sin, gouge it out and throw it away. It's better to enter eternal life with only one eye than to have two eyes and be thrown into the fire of hell.

According to PharmaGossip, KV Pharmaceuticals of St. Louis recieved FDA approval on a synthetic progesterone, Makena, for the treatment of some high-risk pregnancies and promptly raised the price of the drug from the $20-30 charged by formularies to more than $1500 per dose.

Needless to say, several physicians have taken umbrage. "I've never seen anything as outrageous as this," Dr. Arnold Cohen, an obstetrician at Albert Einstein Medical Center in Philadelphia, told the Associated Press. Other doctors echoed his sentiment.

Do you think the marketers at KV misread the Bible verse above and gouged prices instead of eyes?  Maybe they can make a contribution of their profits to the Cardinals so that we can sign Pujols to a long-term deal. Maybe that's the plan!

Posted by Bruce Lehr March 9th 2011.

Slate written by Morons!

This from no less an authoratative source than In the Pipeline.  Derek cracks me up sometimes. Below he prints the synopsis of the latest Slate pronouncement concerning the origin of the drug patent cliff.

So this sudden terrible problem has been obvious and on schedule for at least 10 years.  

It honestly is that simple and that stupid. The pharmaceutical industry turned all its energy toward wringing as much money as possible out of the drugs it already had, and quit making any sort of plans that would lead to having a new (and, you know: medically useful) batch of drugs under patent in the future, when the patents on the old batch expired.

Now the pharmaceutical companies are laying off tens of thousands of workers because they are worried about their financial future, because although they are officially in the business of producing and selling drugs, they stopped producing drugs.

Derek concludes that if Slate authors are pushing that drug companies just haven't been doing any research at all for the last ten or twenty years. . .well, then they're morons. 

Posted by Bruce Lehr March 9th 2011.

 

 

Eyeing India’s Pharma Industry

 

 

According to PharmTech Talk, multinationals are waiting in line to buy India's available drug companies.  Why not?  The India market will have annual pharmaceutical sales growth of 14-17% through 2014 according to IMS estimates -- domestic pharma sales in India are expected to more than double over the next five years.

PharmTech Talk » Eyeing India’s Pharma Industry.

Who are the potential buyers?  Thus far, price is the primary obstacle holding back suitors such as Teva, Merck KGa, Boerhinger Ingelheim, Pfizer, and GlaxoSmithKline.

Who's a possible target? There are several well-positioned Indian firms that have healthy cash flows and strong drug pipelines. Cipla, Glenmark, Torrent, Claris Lifesciences, Zydus, Strides, Aurobindo, and Dr. Reddy’s have already teamed up with Western pharma companies. For most, more than 50% of their revenue comes from overseas markets

Says Y.K. Hamied, chairman of Mumbai-headquartered Cipla. “It all depends on what is available. Buyers are willing to pay a handsome premium for available assets,” he says. Cipla grew nearly 15% between May 2009 and April 2010. So, is Cipla for sale? He guffaws. “Cipla is never going to be sold,” he asserts.

One must keep in mind that Ajay Piramal of Piramal Healthcare had a similar position before bailing out his generic-drug business to Abbott. The Piramal group is using part of Abbott’s $3.7-billion in proceeds to bring to market the country’s first domestically developed drug by 2012.   As for the other Indian-based firms, only time will tell how long they hold out before jumping to a multinational partnership or merger.

Posted by Bruce Lehr March 9th 2011.

 

HGS' Benlysta Expected to Break the Bank

Human Genome Sciences' Benlysta is expected to receive FDA approval this week for the treatment of lupus, the first lupus drug in more than 50 years. Analysts are expecting this to be a blockbuster with peak estimates ranging from $3-$5 billion annually. 

This type of revenue (and more importantly profits) is transformational for HGS which is currently running in the red. Some analysts predict it will become ripe for takeovers virtually overnight post-approval. GSK is partnering with HGS on the drug and they are expected to market it aggressively in the US and expect approval in Europe in the latter half of 2011. HGS has also just added a new 150 person sales force. See Fierce Biotech and MNT. 

 

 

Posted by Bruce Lehr March 8th 2011.

 

Gates Foundation Takes Equity Stake in Liquidia Tech

As reported in Xconomy-Seattle, the Bill and Melinda Gates Foundation has broken new ground by making its first equity investment in a biotech firm.  The company, Liquidia Technologies in RTP, NC, is the recipient of $10 M in equity investing.  The Gates foundation will have a non-voting member on its board as part of the deal.

Liquidia has a novel 3-D nanotechnology that allows it to create specific shaped particles very reproducibly to evoke a specific immune response and is useful in a variety of vaccine applications.  The tight 3-D particle shape control is scalable and is expected to be accepted by the regulatory bodies like the FDA.

In return for its investment, the Gates foundation will have intimate access to the company's development programs and be able to provide input.  They will have an expectation that the company will make its technolgy available for global health products development in keeping with the Gates' mission.  As part of the deal, Gates has specified particular projects that it would like to see Liquidia work on.

Gates says this is a different type of tool it would like to experiment with to back companies in which it has a specific interest that have platform technologies with a wide variety of applications. The equity funding format is more flexible for Liquidia and if things go well follow on funding is possible.

 

Posted by Bruce Lehr Mar 8th 2011.

Biotech IPOs are Extinct. Need New Partnering-Risk Sharing Models

Luke Timmerman wrote this nice piece in Xconomy today talking about how the biotech industry needs to get away from IPOs as a potential funding mechanism and work with new risk-sharing/partnering models. The article uses Plexxikon's experience as a case study of sorts.

Last week, Plexxikon agreed to be acquired by Daiichi Sankyo for $805 M upfront plus up to another $130 M in milestones. And they were able to accomplish this after having raised only $67 M in funding over the years to establish its technology. According to Plexxicon's CEO, Peter Hirth, the company had relatively few means of cashing out as the IPO market was dead to them -- certainly at this type of $900 M+ price. 

Timmerman's point?  If this was true of Plexxikon, a company with something of real value to sell, what are the prospects for other biotechs?  The answer slim and none when it comes to the old IPO model for cashing out. There will be no other Genentech's and Amgen's coming through this mechanism.

Rather, something like the Plexxikon model is more likely to take over. Namely, Plexxikon has established a means to gain an in depth understanding of the targets it pursues, crafts a drug to work with that target, and also develops a companion diagnostic to select those patients who are most likely to respond favorably to its new therapy. In other words, they really understand the biology of the disease and science they are pursuing.

Plexxikon was then able to take its science to partners to develop into therapies.  The deals generated cash flow and funded further development. Plexxikon had to give up some of the ownership of the projects but also gained partners to share the risk.  The company was then able to stick to its area of expertise which was drug discovery and development -- and didn't need to develo expertise in all the other functional areas and their associated costs.

"We'd rather own 20 percent of a given product, not vertically integrate, and license it away at a value inflection point," says Hirth, "the industry really needs to rethink itself.  Most of the people are living 20 years in the past, and don't realize that they need to change."

It's change or become extinct.

 

 

 

 

Posted by Bruce Lehr March 7th 2011.

 

 

Amgen Finalizes BioVex Acquisition

As reported in PBR, Amgen has completed its acquisition of BioVex.  The latter will become a wholly-owned subsidiary of Amgen.  With the acquisition, Amgen will gain access to the investigational oncolytic vaccine, OncoVex, that is currently in phase III trials for the treatment of head and neck cancer and melanoma.

As reported in January, Amgen wil pay $425 million in cash and up to $575 million in additional milestone payments bringing the deal's potential to $1 billion. 

 

Posted by Bruce Lehr March 7th 2011.