DotW: Earn, Baby, Earn

What, you thought we’d go all Sarah Palin on you? We're guessing the phrase “Drill, baby, drill!” is about as popular as that oil slick inexorably spreading toward the Gulf Coast right now. Anyone out there scrambling to remove a certain bumper sticker?

In case you were partying with the Dendreon crowd or locked up in a dark room practicing the pronunciation of what used to be an obscure Iceland volcano -- for the record, it’s ay-uh-fyat-luh-yoe-kuutl -- you must have tweaked that it was another heavy earnings week in biopharma land.

And yes, the handwringing over costs tied to healthcare reform continues, at least if you are BMS, which reported one of the most significant hits on its first quarter earnings call this week. Meanwhile, the EU-based pharmas seem a bit blasé about the issue, or at least they're good at hiding their concern. Execs on GSK’s, Sanofi’s, and AstraZeneca’s earnings calls all sounded the same theme: forecasts already bake in the impact of US healthcare reform.

Of course, the U.S. was a problem territory for many of the multinationals long before health care reform, which is why companies like GSK and Sanofi have been on such a tear in the emerging markets. As the week ended, Pfizer looked to pull a page from Sanofi’s playbook: the world’s biggest pharma is rumoured to be sniffing around the Brazilian generics maker Teuto. Perhaps nabbing Teuto will make up being on the losing end of the RatioPharm deal. (Or maybe Pfizer CEO Jeff Kindler just needs an excuse to visit Brazil.)

Here at IVB, we do our best to earn our keep with a regularly occurring column loaded with insight and levied with snark that we like to call….



Charles River/WuXi AppTec: As top pharmas look to China to outsource more and more of their early stage R&D, the contract research organization, Charles River Labs, deepened its presence in the country this week with its proposed purchase of WuXi for $1.6 billion. The proposed tie-up would create a CRO with end-to-end capabilities, marrying WuXi’s chemistry expertise with Charles River's in vivo biology business. At a 28% premium to WuXi’s closing stock price on April 23, the deal has the blessing of both companies’ boards. To become a reality, however, it must also win approval from shareholders and China’s Ministry of Commerce. Ge Li, WuXi’s founder, and a rock star in the Chinese biopharmaceutical community, will continue to play a key role in the combined company post-merger as an EVP and president of global discovery and China services. As our sister publication PharmAsia News points out, Charles River/WuXi, if approved, represents the third major acquisition of Chinese CRO in recent month following PPD’s buy-outs of smaller players BioDuro and ExcelPharma Studies. Analysts generally hailed the deal but cautioned that even as the combined company provides one-stop shopping, it could face increased price competition from Chinese CROs capable of greater pricing flexibility. -- Kevin Holden and EFL

Aton Pharma/Bristol-Myers Squibb: Advancing its strategy of acquiring underappreciated mature products, Aton paid an undisclosed upfront to BMS April 26 for the US commercialization rights to the off-patent Parkinson’s disease drug Lodosyn. “Our strategy is [to] assume ownership of a product that does not have great awareness within the marketplace,” Aton’s CEO Michael Wells said in an interview with “The Pink Sheet” DAILY. This tactic isn’t exactly new, and it isn’t without risks. ViroPharma employed exactly the same logic when it in-licensed Vancocin from Eli Lilly in 2004 and quickly grew sales of the product. But once it demonstrated a demand for the C. difficile drug, generic competitors quickly piled in, putting pricing pressure on the medicine. For Aton, this deal represents another step in its evolution from oncology-focused biotech to specialty firm. Purchased by Merck in 2004 due to its work in HDAC inhibitors, Aton was bought out by Wells in 2006 (backed by Cerberus Capital Management and his own Princeton Pharma Holdings). Until the Bristol deal, Aton’s entire suite of products, including the Timoptic line of glaucoma drugs in-licensed last year, were originally Merck products. -- Joseph Haas

Merck/Nycomed: Days after Nycomed's Daxas, a potential first-in-class phosphodiesterase 4 enzyme inhibitor for COPD, got a positive nod from the European Medicines Agency, the drug landed a new commercial partner. On April 26, Merck and Nycomed announced a co-promotion agreement for the medicine in Canada, and certain European countries, including France and Germany. (Merck gets exclusive commercialization rights to Daxas in the UK.) The financial terms of the deal were not disclosed, but Nycomed will receive an undisclosed upfront and is eligible for regulatory and commercial milestones. Daxas already has a U.S. commercial partner in Forest Labs, which acquired rights to the drug for $100 million upfront in August 2009. At this juncture it looks like Merck, in the near-term, may have gotten the better deal. Daxas’s regulatory path to approval in the US is far less certain; earlier this month, FDA’s Pulmonary-Allergy Drugs Advisory Committee recommended against approving the medicine due to the drug's apparent modest efficacy and serious side effects. It’s possible FDA still could approve the drug, which has a May 20 PDUFA date. -- Jessica Merrill

Therabel/BioAlliance Pharma: BioAlliance Pharma of Paris announced Monday that privately-held European specialty pharma Therabel is taking an undisclosed equity stake in the company. The ownership stake isn’t unexpected. Therabel and BioAlliance announced an alliance April 6 around the European commercialization of the biotech’s Loramyc, an antifungal drug for use in immunocompromised patients, and Setofilm, an anti-nausea medication for the prevention and treatment of chemotherapy, radiotherapy, and post operative-induced vomiting. The deal includes a €6.5 million upfront and up to €48.5 million in milestone driven payments, and at the time BioAlliance hinted an equity stake worth €3 million was on the table. It's worth noting the April 6 deal holds one of the first examples of a trend we’ve long been predicting would materialize: milestones tied not to a drug’s sales but to its reimbursement. The press release clearly states, “additionally €3 million will be linked to Loramyc reimbursement in three EU countries.” The prospect of a reimbursement driven milestone was a subject of much debate at our recent Pharmaceutical Strategic Outlook meeting, where some dealmakers argued that the hedge was already included in sales milestones. What do you think, IVB reader? Are more reimbursement milestones on the way? -- EFL

Image courtesy of flickrer TW Collins through a creative commons license.

jonah update

This will be super short because Jonah has just gone to sleep (in the crib!), and I'm going to try to sleep when he sleeps.

The hoarseness has not gotten any worse, and seems to be only when he cries or is doing something where he's pushing more air. He's mostly silent now as he sleeps. He's taking three to four ounces of Pedialyte by mouth every few hours and seems to be tolerating it okay. They still have that drain thingy on his stomach, but we are clamping it shut for an hour and a half with each feeding, and it seems he is able to absorb more and more each time... which is good. Right now he is just on clear fluids (through his IV and what he wants by mouth), but I think tomorrow we will start with formula.

Tomorrow the g-tube education begins. I'm a little apprehensive, but know it will become the "norm" just like everything else has.

Matt has gone home for the night per my insistence. The bed is TINY here, so it was either we both cram in the bed (skinnier than a twin) and neither of us sleep, one of us in the bed and one in the "recliner" (being very generous with that description), or both of us trying to get decent sleep by each being in a bed. He'll trade off with me tomorrow night if I let him, but that will all depend on how Jonah's doing. If nothing else, I'll go home tomorrow while others are here and sleep a few hours.

Prayer requests for tonight/early tomorrow:
- that Jonah will sleep (and be allowed to sleep) through the night.
- that the morphine will work at keeping him pain free overnight.
- that we can get this IV and drain thingy out AS SOON AS POSSIBLE. (Every time he moves I'm cringing, afraid he's either going to pull his IV out, thus hurting his skin or going to pull on the tube, thus hurting his skin and his incision site).
- that he will not roll on his tummy during the night (fat chance)... not because of the g-tube button but because if he rolls over on that drain (sorry for not knowing what it's really called), it may hurt his incision site and/or his skin from rolling on top of it.

Thanks for all the prayers. I'll try to update as I can but tomorrow will be crazy with rounds and dressing change etc. I will try to do quick updates on Twitter (right sidebar) if I don't have time to sit down and post.

tough guy

This is one tough and resilient little guy...

... but once in a while, even tough guys have to take a snooze on their Granny.

Things are still okay. Jonah just had some morphine about an hour ago and did seem to be in some pain. He's still sleeping this way now. His "voice" is very raspy, so we're trying to decide if this is the normal "I was just intubated" sort of raspiness or if he's having some airway inflammation and/or blistering. Please continue to be in prayer for that issue. It's the thing we've been most concerned about since we started thinking about this decision months and months and months ago.

update

Sweet Jonah is doing well. He was so tired, but, after some Tylenol, was playing and smiling in his room. Matt finally got him to sleep, and this is what he's up to as we "speak"...


The surgery went well, and when I went back to wrap his torso after they were done, it appeared there was only a tiny bit of blistering around the incision site. It wasn't even enough to drain at the time. I haven't taken the Lite (bandage) off to look at it since, but I've tried not to mess with him too much. If he acts okay when he wakes up, I'm going to try to take a better look.

I got to go in and help with securing the IV, pulse-ox, and leads. Actually, the doctors were gracious enough to let me kind of lead that process, and I did pretty much everything but the actual IV. They were WONDERFUL, especially Dr. S, our anesthesiologist, who happens to be a former Young Lifer. :)

This is me between prep and the post-op rewrapping. I came out to wait with the family during the actual surgery. They would have let me stay the whole time, but I didn't want to be in there for the cutting.


Flattering photo, huh?

While the anesthesiologist was finishing up and the surgeon was waiting to start, I kept asking him (the surgeon) if he watched doctor shows and what he thought about Grey's Anatomy. I also cracked some (inappropriate) joke about Grey's, saying something like, "Hey, when we run out of plot lines, we'll just make them have sex in the on-call room." And in my head the whole time I was saying to myself, "Self, just SHUT-UP. Seriously, stop talking now."

What can I say? I joke around when I'm nervous.

But seriously, it was a great experience all the way around, and the only reason I was smiling like that is because of all your prayers and how incredibly AT PEACE I felt. Don't get me wrong, I was crying on the way to the hospital and completely lost it while holding Jonah as he got loopy and started to giggle because of the drugs. But when we went to that OR, it was like a peace washed over me, I went into "get 'er done" mode, and everything went so well. I know that the peace I felt and my ability to remain unemotional (or low emotional anyway) was straight from God.

But enough about me. Jonah has come through, so far, like a champ and is doing well. He's been fussy some, but has also smiled and played. He's sleeping peacefully in Daddy's arms. His breathing seemed pretty raspy to me before he fell asleep, but I think it might have just been that he was overly tired, because his breathing sounds pretty good now, while he sleeps.

Some of you like specifics to pray for so here they are:
- for his trachea and breathing; that no damage was done during intubation
- for any blistering or irritation that may occur around the button
- that he won't rip his IV out (which is in the top of his foot)
- that he can have a peaceful night's rest (he really needs it)

Baby J's waking up now, so I better run. Thanks again for all the love and prayers.

Oh, and I also wanted to say a HUGE thank you to all the EB parents/friends who helped me get that list together. It was compiled from all their suggestions they sent me through email. You guys are so awesome, and today would not have gone as well as it did without you, not even close. Thank you for helping me help Jonah. Love you guys so much!

GSK Notes: We Have More Sales Reps in Emerging Markets than in West

GlaxoSmithKline's earnings call on April 28 was pretty routine, with no big surprises – nice growth, health care reform and all that, but executives did an interesting albeit somewhat shallow, dive on emerging markets.

GSK is one of the few, if not the only, Big Pharma to break down its emerging markets operating margins, which is laudable considering interest in the region (Even as pharma emerging markets sales skyrocket--and they were up 45% for the quarter at GSK--profitability isn't transparent).

Tim Anderson of Sanford Bernstein picked up on this topic, one of his favorite themes, on the earnings call: GSK's operating margins in emerging markets, at 36%, for example, is only slightly more than half of its margins in established markets. "Where do you think operating margins and emerging markets can realistically go from here over the next three to five years given what is likely to be a continual pricing disparity?" Anderson asked.

That led CFO Julian Heslop to respond: "Difficult to predict the future"…but 36% operating profit margin in any business is "excellent." And emerging markets don't require the heavy R&D investment that Western markets demand, so cost of goods sold is lower. If pharma R&D costs tend to run about 16% of sales overall, the products emanating from the labs account for only a third of emerging market sales, Heslop said. So a thumbnail calculation could charge a third of R&D costs to emerging markets.

After all, R&D priorities are driven by Western demands, chimed in CEO Andrew Witty. His further point: GSK's definition of emerging markets does not include Southeast Asia, Australia, or Japan, which GSK breaks down separately Clarification: Its emerging markets group consists of 10 countries, and does include India and China. That's important because GSK's Indian business is huge –Witty couldn't help pointing out that it is in the top three manufacturers of all types in India (GSK doesn't break down sales that far, though).

Overtime, GSK should be able to better leverage its growing infrastructure investment in emerging markets as it expands its sales capacity (not only for its own home-grown products; it has an aggressive in-licensing program specifically focused on bringing in late-stage products to sell in emerging markets, with its most visible success to date its alliance with Amgen to sell Prolia). And growing it is, both organically and through bolt-on acquisitions. Of the 11 bolt ons it did in the past year, most were in emerging markets, Witty said.

"For the first time over the last 3, 4, 5 months, we actually have now more sales personnel in the emerging markets than we do in America and Europe combined," he added, "…a pretty big shift." After all, he reminded investors, "This is one of those moments where we are seeing fundamental economic shifts go on in the world economy."

Moreover, Witty noted--and here's a comment to wake you up: "every dollar spent on SG&A in emerging markets in the past two years has been paid for by a dollar taken from Western budgets."

g-tube surgery updates

9:30 am - Jonah is in recovery. Everything went well! Patrice and Matt are with him right now.

8:45 am Finshing up the surgery. Everything has gone very well. Patrice just went back to the OR to re-wrap Jonah.

7:50 am - Jonah is successfully (and safely as far as we know) intubated, with leads, pulse ox, and IV EB-safely secured. I (Patrice) was back in the OR for all of that, but sat in the corner and didn't watch for intubation. Everything looks really good so far, and I assume surgery has just started. Please continue to be in prayer for sweet Jonah. We sure do love that kid.

surgery tomorrow

This cutie...

... goes in for surgery tomorrow at 6:00 am.

Actual surgery will probably start around 7:30.

I'd ask you to pray but I know you already are because you are awesome like that.

I will most likely be back in the OR helping out, but Matt will try to update the blog, assuming we have Internet access.

Thank you for keeping us in your thoughts and prayers.

MermaiHD Madness: NeuroSearch's Statistically Significant Snafu

Call it the Curse of the Little Mermaid.

In February, NeuroSearch trumpeted statistically significant Phase III results from its MermaiHD trial lead project Huntexil in Huntington's disease. The positive data sent the company's shares soaring. The Danish biotech's value nearly tripled, and analysts suggested that the data supported launch of the drug in 2011. The company spent the past few months topping up the good news: additional data presented at conferences, new information supporting disease modifying properties of the drug, etc.

Neurosearch was riding high -- a company that has had difficulty over the past decade securing positive Phase III results after promising proof of concept data finally got over the hump.

And then, last week, Denmark's famous Little Mermaid statue was removed from Copenhagen Harbor and sent to Shangai, where it will take pride of place at the Danish Pavillion during the 2010 World Expo.

Mermaid gone (a replica in Tivoli Gardens just ain't the same, we guess), and MermaiHD is all of the sudden showing cracks.

This morning NeuroSearch put out a release to clarify the MermaiHD results. That missive shaved 40% off the company's value almost immediately, though the share price has slowly recovered a bit as the day wears on and executives have had the chance to explain themselves. The upshot? It turns out that MermaiHD's positive results around the primary endpoint of modified Motor Score (mMS) weren't statistically significant, after all.

That's right. "Additional data assessment" turns out to skew the Phase III results just slightly, but enough to upend the statistical significance of MermaiHD's primary endpoint. "Further assessment of data from the study shows that the significance value for the primary study endpoint, the modified Motor Score (mMS) of p= 0.042 did not meet the pre-specified level of p [less than] 0.025," says the company's release.

Wait, can you say that in a much longer, more detailed way?

The conclusion regarding the primary endpoint, the mMS with a significance level of p [less than] 0.02, which was communicated as part of the top-line results, was based on a clinically relevant baseline covariate adjustment for differences in patients' genetic disposition, i.e. the length of CAG repeats (CAGn) in the diseased gene sequence. This adjustment is judged to be clinically important and appropriate in ensuring a more meaningful representation of the data set. Based on this assessment, the primary endpoint for the MermaiHD study was concluded to be met (p [less than] 0.025). The adjustment for individual differences in patients' CAGn x treatment was pre-specified in the study protocol as a sensitivity analysis but not as part of the main effects model for the primary analysis. In view of this, the statistical results have been re-assessed, demonstrating a formal p-value of 0.042 for the primary endpoint, the mMS, and consequently indicating that the study did not rearch the p [less than] 0.025 significance level (Bonferroni adjustment) as pre-defined in the study protocol.

Get it, statheads? But what does it all mean? NeuroSearch maintains that its regulatory strategy won't change and that the new data "doesn't change the overall picture" for the drug. Analysts who were able to wrap their heads around the implications for Huntexil during the company's results call this morning seem to agree that this isn't the end of the line for the Huntington's drug -- thought it may complicate the regulatory process a bit. Results from a second Huntexil Phase III, the so-called HART study, are expected in Q3.

Let's hope for NeuroSearch's sake, the Little Mermaid is back from China by then.

image from flickr user celesteh used under a creative commons license

Summing Up the Biotech Way: Beyond Borders 2010

One scorecard from 2009 is in: Ernst & Young's annual report on the global biotech industry, Beyond Borders. This Summing Up –which this fanciful blogger envisions as an annual, exhaustive biotech version of Somerset Maughan's eclectic memoir—is published annually just as the industry gears up for BIO, as a mix of sweeping generalizations, trend-spotting, and interesting statistics on financing.

Much of the 2010 report isn't news, especially to followers of IN VIVO Blog—how hard is it to figure out, after all, that biotech is an industry of 'haves' and 'have-nots?' or that the venture investment model is under pressure, resulting in new financing and R&D models (asset-based financing, options-based deals, FIPNets), and pharma companies are divesting assets? More importantly though, the report contains interesting datapoints, piecing them together to obtain a coherent picture of the industry at a given point in time, and providing fodder for BIO networking.

So what are some chatable points? Biotechs took their lumps last year but, overall, they fared better than E&Y or others had predicted. They've been aggressive about paring costs, cutting back on R&D, staff, and shelving non-core assets. They've been creative about finding new ways to finance operations as they slog through the long R&D tunnel. The number of public companies fell by only 11% in 2009 to 662 from 700 a year earlier, E&Y calculates--not healthy, surely, but far short of what E&Y last year predicted would be a 25% drop.

Industry global revenues fell by 9% from $86.8 billion to $79.1 billion in 2009, true, but that includes the impact of Roche's acquisition of Genentech. Without this acquisition, biotech revenues would have grown by 8% (An 8% rise is better than a 9% decline, but it still isn't up to growth rates of years past, EY points out). Tighter regulatory safety requirements have slowed new drug approvals, not only in the US but in Europe as well.

Other tidbits: Biotech companies raised $23.2 billion last year, up 42% from 2008, and while venture capital totals were flat globally, the US had its second-best venture funding year since 2000, while Europe had its worst. That said, about half of US venture capital raised went to only 45 companies, with Clovis Oncology the big winner. And companies with early-stage technology need more money than ever to carry their products through clinical development.

More to the point, industry R&D spending fell 21%, after years of double digit growth. It's hard to say if this is a self-correction or a true stab at improving R&D efficiency, but that drop helped biotechs in aggregate to post a net profit for the first time of $3.7 billion; in 2008, the industry lost $1.8 billion. Other reasons included a change in accounting rules, fewer public companies, since most of the acquired companies were losing money anyway, and other cost reductions. Asset sales, royalty and milestone payments also played a role, but even E&Y couldn't say by how much.

Another weight hanging over the biotech head: reimbursement: E&Y notes that companies, which traditionally viewed marketing approval as the finish line for deal-making, now must cross additional hurdles related to reimbursement. Nothing new for IV Blog followers here: Now, we've been tracking this still esoteric but increasingly talked about trend of setting special reimbursement milestones for deals and its counter argument: that traditional sales milestones cover reimbursement risk--an evolution we find fascinating.

The takeaway:

Life is getting tougher: Gaining an FDA approval alone is no longer an event worthy of popping the champagne, unless payers can be convinced of a product's value. This means, the earlier biotechs and big pharmas alike invest in pharmacoeconomic analysis, the better. As E&Y puts it – there needs to be a thought process of: "If you build it, will they pay?"

Easier said then done, in the eyes of some. E&Y however, notes the industry was built by entrepreneurs, who will find creative responses to pricing pressures. Just what will these look like? Even E&Y can't say right now.

image from flickr user nim used under a creative commons license

eb fundraiser

Just wanted to do a quick post to let you know about a fundraiser going on this weekend to raise money for EB research. There is a walk going on in the Cincinnati area to raise money for the Epidermolysis Medical Research Foundation in honor of a three year old little boy, Carson, who has RDEB.

Here is an article about it that appeared in the Cincinnati paper, and the website for the walk is www.walkforeb.org.

If you would like to donate, you can do so at the event or you can mail donations to:

Walk for EB
P.O. Box 531074
Cincinnati, Ohio 45253.
Checks should be made payable to: EB Fund.

Hope all you Cincinnatians (is that right?) can make it out and that the rest of you who are able might consider mailing in a donation.

Many thanks, as always. :)

what i've been up to...

This is what I've been doing today -

General Instructions –
DO NOT USE ANY TAPE OR ADHESIVES ON HIS SKIN.
Do not use Latex gloves.
Lubricate gloves with Aquaphor or similar lubricant.
Vitals need to be taken over bandages or wrap Transfer (T) or Conco (roll gauze) over his arm first.
Do not rub him when picking him up. Do not pick him up under his arms. Scoop him up instead.
Move him by lifting, NOT SLIDING.
Do not rub alcohol (or anything else) on his skin. Dab lightly instead.
Pad the table. (egg crate or sheepskin?)
Lubricate anything that will come into contact with his skin.
Heavily lubricate his eyes.

Pulse Ox –
1. For VELCRO kind – wrap Conco (roll gauze) on digit or place small Transfer strip (T) or square on skin and Velcro over bandaging. If it won’t register and is soft material, may can go straight on his skin – lubricate skin first. Should not rub.
2. For CLIP kind - wrap Conco (roll gauze) or place small square or strip of Transfer (T) around finger/toe first and then clip on.
3. For ADHESIVE kind –
Remove any sticky part.
Lubricate skin or probe.
Place thin Kleenex or Conco on skin.
Place probe on top of Kleenex or Conco.
(Can possibly go directly on skin if it won’t register over Kleenex or Conco.)
Secure with square of Transfer (T) or Lite (L) or Lite Border (LB) or Conco (roll gauze).
OR
Wrap light layer of Conco (roll gauze) and put probe on top. Tape probe down to Conco (NOT skin) or wrap more Conco on top to secure.

IV –
1. DO NOT suture IV unless absolutely necessary.
2. Secure IV after he’s sedated. (LUBRICATE mask well or just hold mask over face, not touching skin.)
3. DO NOT RUB his skin or let catheter touch his skin.
4. After it’s in, wrap Transfer (T) around arm underneath the IV catheter. Use the Mepitac tape (M), Conco (roll guaze) or Tubifast (stretchy tubular cloth) to secure catheter to Transfer.
5. Mepitac Tape (M) -but only Mepitac- can go on his skin if necessary. Please let me remove or remove slowly and carefully. If edges are stuck, use Aquaphor to release.
6. ONLY TAPE THE IV TO THE BANDAGES.
7. DO NOT PUT TAPE ON SKIN.
8. If for some reason you must put tape on his skin, ONLY use the MEPITAC tape I’ve provided.
9. Let me remove any EB safe adhesive from skin. I have special spray that will help remove it.

Leads –
1. Remove adhesive.
2. Lubricate skin where lead will touch skin if lead will still register that way. (ultrasound gel?)
3. Cover with squares of Lite Border (LB), Lite (L) or Transfer (T). (They are EB safe adhesives.)
4. You can also wrap Conco (roll gauze) around his chest over the Transfer if you need more security. DO NOT WRAP TIGHTLY. If they dig into his skin, he will blister.
5. REMOVE GENTLY AND SLOWLY. You can “soak” off bandaging with Aquaphor under edge or with water. Do not pull off quickly or his skin will tear.

After Surgery:
1. Only remove what you have to. If anything is stuck to his skin that can stay on outside of the OR, please let me remove it.
2. Put piece of Lite (L) around the stoma, under button, so tube will not lay directly on his skin.
3. Extubate him before he wakes up. Go slowly and gently.
4. All limbs and torso (as much as possible) need to be rewrapped before he wakes up or his general movement will cause him to blister himself.

PRIVATE room.
Reverse Isolation.
Trash to be left outside, so custodial staff does not enter his room.
OWN vitals equipment, to reduce infection risk.
Low dose steroids to reduce inflammation in airway?
Anti-nausea meds?


I still have to cut and label all the individual bandage pieces and put them in corresponding bags labeled Pulse-Ox, IV, Leads, and Post-Op.

And pack four days of bandaging supplies.

And pack everything else.

Don't be surprised if you don't get a lake post from me until Christmas.

I emailed all this info to the surgeon and anesthesiologist and felt the need to end the email with: "I'm not crazy and overbearing although it may seem like it. :)"

Why do I feel the need to explain or rationalize my control issues?

EMBRACE THE CRAZY, people. Embrace the crazy.

Asclera: A REMS By Any Other Name…

Quick quiz. There’s a new molecular entity pending at FDA, intended for a cosmetic use. There is a clear signal of a risk of anaphylactic reactions, most likely associated with off-label use at high doses. The review team is in agreement: there needs to be some form of communication plan and special monitoring to assure that physicians don’t casually use higher doses.

Will the product have a Risk Evaluation & Mitigation Strategy as a condition of approval?

We don’t know about you, but our guess would certainly have been yes. After all, FDA seems to be using REMS more and more, right?

Well, not this time.

Here is how Cardio-Renal Drug Products Division Director Norman Stockbridge explained the decision, in the summary review of the March 30 approval of BioForm Medical’s varicose vein treatment Asclera (polidocanol):

“All team members concur on approvability.

An issue to be resolved is how to address the risk of anaphylaxis. There are no such cases in the controlled experience, but there are other allergic reactions—urticaria, hives, sneezing, and what sounds like angioedema. Similar cases to these appear in post-marketing use [overseas]. Post-marketing, there appears to be one reasonably clear anaphylaxis case following low-volume administration to treat a leg varicosity….

Overall, the team has the impression that the risk of anaphylaxis may increase with dose, and that seems plausible. A goal of labeling and any additional post-marketing safety-related activities ought to be discourage off-label use for larger varicosities where the volume of drug necessary will be much higher than it is for the indicated uses.

Dr. Southworth recommends a bolded warning, similar to the one sotradecol has. I concur with this. She recommends a communications plan for healthcare providers for the first few years, and annual review of hypersensitivity reactions. (These can be done outside of a REMS.) I concur with these, too.

She is equivocal on a medication guide, citing the closely monitored setting of administration. I do not favor a medication guide; there is ample opportunity for the patient and physician to discuss treatment options, and practitioners are generally familiar with the risks from use of sotradecol. While I agree with Dr. Southworth that the cosmetic use creates a low threshold for taking conservative measures, I do not think the bar should be quite this low.”

Final decision: approval with no REMS.

So is this a sign that REMS mania has crested? Should sponsors celebrate the return of a standard where REMS are the exception rather than the rule?

Well, not so fast.

First, Stockbridge has already voiced his displeasure with some of the accoutrements of the “Safety First” era, declaring in his memo on Effient that “no one associated with this review should feel good about this.” He meant the endless deliberations about the potential safety issues with Lilly/Daichii’s clot-dissolving drug. Stockbridge was clearly ready to approve the drug long before he wrote those words in April 2009. But Effient itself wasn’t approved for another three months after.

In other words, Stockbridge can’t change anything on his own, and its clear that other FDA review managers have different levels of enthusiasm for the new safety tools. For example, FDA’s Endocrine & Metabolic Drugs Division management, for example, seems to have a very different view of the value of REMS tools. (We’ll have more on that in an upcoming issue of The RPM Report.)

And, while Stockbridge’s rejection of a REMS did avoid a last minute delay for Asclera, it didn’t exactly make this a lightning fast approval. Asclera was first submitted in 1999, and got a “complete response” in 2004. Meanwhile, it continued to be marketed overseas, building the safety database that helped reassure FDA that the risk of anaphylaxis is very rare. That puts Asclera in a venerable class of NMEs that always have an easier time at FDA: those with long marketing histories overseas.

More importantly, while there isn’t technically a REMS on Asclera, there might as well be. FDA and the sponsor agreed to a Dear Doctor letter at launch outlining the risk of anaphylaxis. It isn’t required, so it isn’t a REMS—but it was agreed to prior to approval, and we bet the sponsor doesn’t see much difference there.

And then there is a mandatory post-marketing study—a pretty unusual one at that:
The sponsor will provide “a yearly report (containing both interval-based and comprehensive data) analyzing spontaneous adverse event reports received that describes anaphylaxis or death.” Reports are due annually until 2016.

So BioForm doesn’t have to comply with a REMS. But it does have to send a “Dear Doctor” letter warning of a very rare potential adverse event with off-label use, and submit annual analyses of post-marketing reports.

A REMS by any other name still smells as sweet…

While You Were Turning Three

It's IVB's birthday, so have a cupcake. As always, thanks for reading and commenting. And remember, IVB is just the appetizer -- check out the rest of what we have to offer.

On to your weekend news. While you were grounded ...

• Charles River Labs is buying WuXi Pharmatech in a cash/stock deal valued at $1.6 billion, creating a worldwide presence in early stage drug development services. The deal prices WuXi at $21.25/ADS, a 28% premium to Friday's close.


• Nycomed has inked a set of deals with Merck & Co. around European and Canadian rights to Daxas, its first-in-class PDE-4 inhibitor for COPD. The Swiss pharma wasted little time cashing in on the positive opinion it received late last week from EMA's CHMP.


• Index Ventures unveils Index Seed. The VC is dedicating a pool of capital to seed investments and hopes to do 20 over the next two years. The fund will have a technology focus, but life-sciences deals aren't ruled out.


• In the New York Times Magazine, blogger/psychiatrist Daniel Carlat explains a fundamental shift in his field, one that has led to a split between specialists in therapy and psychopharmacology and the implications for patients today and the future of psychiatry.

image from flickr user clevercupcakes used under a creative commons license

thank you

Matt, Jonah, and I went to spend some time this weekend at Smith Mountain Lake in Virginia. His work has a condo there that employees can use for free, so we decided to take advantage of it for Gabe's weekend. More to come about that later in the week.

Tonight I just want to say THANK YOU for all the prayers, thoughts, and sweet comments this weekend as we remembered our sweet Gabe. I've told several people that it was so much harder this year than last. As Jonah gets older and learns, explores, and does more and more, I fully realize what I'm missing out on with Gabe. And last year I think we were just running in survival mode, and I didn't even have the opportunity to really FEEL anything. But this past week, friends, I have felt it. And it hurts. We buried our sweet boy two years ago today. Every day from April 20th until Mother's Day seems to be another sad memory.

I also just wanted to say a special thank you to Sara, who sent me these beautiful photos she took at the Hanauma Nature Preserve in O'ahu, Hawai'i.



Thank you, Sara. They are breathtaking. (And also, I'm a little jealous.)

Love you all,
Patrice

eb awareness public service announcement

This Public Service Announcement will air on Discovery Health in June for the EB Patient Care Conference and again in October for EB Awareness Month. It's very well done.

And Jonah makes an appearance at the nine second mark, on the left. We had no idea he was in it until we just now watched it...

I also wanted to mention that we lost another JEB baby this week. His name was Owen, and he was only five weeks old. Courtney wrote about him here and here. He was actually born at the same hospital Tripp goes to, and Courtney had the honor of meeting him and his parents. He got a blood infection and just couldn't overcome it.

We are desperate for a cure. How many more will we lose before we get our miracle?

Thank God Owen is pain free now. Completely restored and PERFECT!

DotW: High(er) Hurdles

It's no secret the hurdles to drug development are getting higher. But the commercial bar has been raised, too. Those with doubts need only look at Novo Nordisk's efforts to pressure-test its Type 2 diabetes medicine Victoza, not just in head-to-head trials against its major competitor, Byetta, but also against orals like Merck DPP-IV inhibitor Januvia.

Much of Novo's future success rests on Victoza's acceptance in the marketplace. Despite regulatory delays, prescription trends show the drug is one of the few successful launches in the past year, especially when compared to the dismal adoption of either Johnson & Johnson's Simponi or Lilly/Daiichi's Effient.

But Novo is taking no chances. Its head-to-head trial with Januvia published Thursday in The Lancet proves that. In an interview with Reuters, Mads Krogsgaard Thomsen, Novo's chief scientific officer, made no bones about competing in a world where comparative effectiveness is the modus operandi: "The fact that Novo Nordisk has now done most, if not all, of the major comparator studies against different classes of oral and injectable anti-diabetic drugs really shows our commitment to showing comparative efficacy in a serious way," he said.

Comparative effectiveness is also holding sway over deal-making. We haven't yet seen deals with milestones tied to reimbursement, but we've seen plenty of deals terminated because the product's potential for commercial success was limited. The latest example is Forest Laboratories pulling the plug on its partnership with Phenomix to develop dutogliptin, the biotech's Type 2 diabetes medicine. Forest announced the move on its earnings call this week.

Analysts have never been that hot on dutogliptin, yet another DPP-IV inhibitor in a crowded space. And while Merck's Januvia has done well, with sales topping $3 billion, the same cannot be said for Onglyza, which AstraZeneca and Bristol Myers Squibb have brought late to the DPP-IV party.

Forest is new to the diabetes space and might have gotten cold feet in the wake of Onglyza's disappointing sales. Of course, the changes to FDA's diabetes guidelines, which are sending the cost of clinical development sky high, also might have chilled Forest's ardor. Forest isn't saying much beyond "business reasons" to explain the deal's demise.

Phenomix is trying to put the best spin possible on the news. The same day Forest axed the program, the biotech reported positive data from a Phase III six-month study comparing dutogliptin to placebo. Phenomix' drug appears to have similar efficacy but better safety and tolerability than other DPP-IVs, noted CEO Laura Shawver in an interview with "The Pink Sheet" DAILY. The company has four Phase III programs underway and plans to run a fifth cardiovascular study to meet FDA's new diabetes guidelines. The pressure is on for Phenomix to find a new partner and more cash.

It's yet another way biotech is like a singles bar: you're one of many in a crowded field, you need a new partner, and the drinks are more expensive than you realized. Sometimes it's better to go home, put on your flannel PJs, and curl up with another edition of...

Novartis/Oriel: With the acquisition this week of privately-held Oriel Therapeutics for an undisclosed sum, Novartis' Sandoz unit gains a portfolio of drug candidates and related technologies for asthma and chronic obstructive pulmonary disease, a key therapeutic area for the generic drug maker. With GlaxoSmithKline's Advair, AstraZeneca's Symbicort, and Pfizer/Boehringer Ingelheim's Spiriva losing patent protection by 2016, Novartis's Sandoz hopes to capture a big chunk of the inhalable respiratory generic market. It can be quite lucrative because the complex delivery systems are a barrier to entry that potentially limits competition. Sandoz has already put $60 million toward the development of a new facility in Rudolstadt, Germany with manufacturing capacity for dry-powder inhalers and metered-dose inhalers. The acquisition of Oriel, meanwhile, provides Sandoz with three development projects targeting leading medicines and a novel delivery technology, FreePath. Sandoz's work in generic respiratory meds complements Novartis's innovator products; the pharma has a long-acting beta 2 antagonist, indacaterol, in development for COPD in the US and marketed in Europe as the Onbrez Breezhaler. -- Jessica Merrill

Clovis/Ventana: Less than a year after securing $145 million in start-up financing from a cadre of blue-chip investors in the largest A round ever for a biotech, in-licenser Clovis Oncology has mapped out a development and approval track for its first drug, which under a deal announced this week, will include a companion diagnostic to be developed and sold by Ventana Medical Systems. In November, Clovis acquired rights to Clavis Pharma’s lipid-conjugated formulation of gemcitabine based on information showing the drug, renamed CO-101, could outperform gemcitabine in pancreatic cancer patients with low levels of a specific transporter protein, hENT1. (This population is estimated to be 50% of the total number with the disease.) Clovis also believes CO-101 will work as well as gemcitabine, the current standard of care for pancreatic cancer, in patients with high levels of hENT1. Its 250-patient trial will capture data on the performance of CO-101 head-to-head against gemcitabine in both the hENT1-low and -high populations, and could be sufficient for registration filings in the US and Europe, said CEO Pat Mahaffy. When ready, the Ventana diagnostic will sort patients into low- or high-level populations using tissue biopsies collected at the start of the study. The program reflects Clovis’s intention to develop drugs with a clear path to approval, incorporating a companion diagnostic. “We are strong believers that technology and the regulatory environment are driving toward exactly this approach,” said Mahaffy. -- Mark Ratner

Novartis/Array: Boulder, CO-based Array BioPharma has an array of options now that it has partnered its small molecule MEK inhibitor program to Novartis in a deal worth $45 million in upfront and near-term milestone payments, and downstream milestones totalling another $422 million. It's anecdotal evidence of a factoid we discussed at Pharmaceutical Strategic Outlook: early-stage deal values, especially for Phase I products, are on the rise. Analysts and investors found a lot to like in the deal, Array's second high-value collaboration in four months, and sent the firm's stock price soaring more than 30% in after-hours trading following the announcement. Novartis gains exclusive rights to ARRY-162, currently in Phase I trials for biliary tract cancer, plus a back-up compound ARRY-300 and earlier compounds. Array has the option to co-develop '162 in one or more indications and co-promote it in the US. (That seems to be another de facto condition of oncology deal making these days.) One reason the product might have attracted such a healthy sum is that its safety profile is largely derisked from its Phase II trials in rheumatoid arthritis. There were no safety problems, but the trials were a big disappointment, with the drug doing no better than placebo at thwarting the disease. -- EFL


Boehringer Ingelheim/Biota: BI terminated its 2006 agreement with the Australian pharma Biota Holdings for nucleoside analogs to treat hepatitis C, largely because it could not identify a suitable pre-clinical candidate to advance forward, the companies announced April 20. Rights now revert to Biota, which develops anti-infectives and originated the flu drug Relenza (zanamivir). Biota could have earned up to $102 million from Boehringer if a compound reached the market. At least it has a steady flow of Relenza cash. It reported $AU32.6 million in royalties from GlaxoSmithKline for Relenza for the quarter ended Dec. 31, 2009, with expected royalties of AU$56.7 million for the first half of 2010. Under the 2006 deal, Biota licensed to Boehringer global rights to develop and sell its tricyclic group of nucleoside analog drug candidates for HCV infection and possibly additional indications. In turn, Boehringer agreed to an up-front technology payment, preclinical, clinical, regulatory, and sales milestones, plus R&D funding totaling $102 million. The companies worked jointly on the HCV research program from the time they signed the agreement until last November, when Boehringer-Ingelheim took over R&D activities. -- Carlene Olsen

Image courtesy of flickrer Robert Voors via a creative commons license.

Financings of the Fortnight Can't Get Excited About The IPO Party

Sure, Alimera Sciences just debuted, the sixth biopharma to do so in 2010 and the 10th to go public since the window re-opened last year. But like so many other biopharma IPOs of late, the issue was replete with caveats (see below). Optimists will say, hey, public is public. Just get us liquid to access more capital, and give our investors an exit. But public demand is so weak, some stocks are about as liquid as toothpaste. (Would that make an IPO a colloidal event?)

And if optimism abounds, why aren't more biotechs filing S-1s? Strike that. Why aren't any biotechs filing S-1s? This isn't the first time we've noted the curious lack of fresh meat in the IPO pipeline. But now that AVEO, Tengion, Alimera, not to mention French firm Neovacs, have all flown out the door in the past fortnight or two -- and all with rather alarming haircuts that range from 30% to 50% -- the registration nest is practically empty.

Plenty of companies could file papers and make it official, and you can bet your sweet patoot the bankers are pushing hard. But a lot of investors are pushing back. Take Alta Partners' Alison Kiley, who said at the BayBio conference two weeks ago that her firm was in no rush to get its late-stage biotechs to the public prom. Or the opinion of another prominent VC, who told The IN VIVO Blog this week that the current IPO scene is "a sham."

Cooley Godward Kronish's life-science chair Barbara Kosacz would agree. In a recent interview she told IVB, "I don't think of there being any window open. It strikes me as a horrible time. Some companies are going out, so I guess you could, but most boards are adamant about not going near it."

Until we see the S-1s, that giant sucking sound you hear is the biotech IPO pipeline washing out to the vast public sea. Here we're tempted to extend the metaphor -- "only to be eaten by sharks," or "fated to drift into a dead zone of investment detritus" -- but we allow a few are bobbing along nicely in the aftermarket (AVEO is up 7%, Ironwood Pharmaceuticals 27%).

We'd be remiss not to mention the Q1 venture numbers that came out last weekend. DowJones VentureOne reported $619 million in U.S. biopharma funding, the lowest quarterly figure in at least five years and down 20% from the first quarter of 2009. Chalk it up to the health reform fight, which dragged on through March, or perhaps to the traditional lag in dealmaking coming back from the holidays, or to VCs hanging on to what they've got so they can see their current portfolio through.

Then the calendar turned to April, and it suddenly felt like 1999 or 2000 again with a bloom of generous rounds for early-stage biotechs. This week we profile two big B rounds, Biocartis and AiCuris, but there were plenty to choose from: $40 million for Catabasis Technologies' A round, Sagent Pharmaceuticals' $40 million B round, and Foundation Medicine's $25 million Series A. Foundation's lead investor is early-stage firm Third Rock, which recently filed its Form D -- as in "daring"? "Daunting"? -- to kick off its second fund with a target of $400 million.

How about "doable"? The money is out there. One year ago early-stage investor 5AM Ventures reported a goal of $120 million for its third fund. It closed in December with $200 million. And in February Orbimed closed a $550 million fund, Caduceus IV, with 80% of the backing coming from repeat investors.

We have a feeling the Q2 numbers will not be nearly as grim. Until then, turn up the volume and party on with...



Alimera Sciences: Like we said up top, haircuts for biotech IPOs are so in style. Regenerative medicine player Tengion priced an ugly 44% below its target on April 8, and now the latest fashion victim is Alimera. The ophthalmology company grossed $72.1 million, but it was forced to slash its per-share price to $11, 31% below the $15 to $17 range it touted in early April. Alimera also bumped the number of shares from 6 million to 6.6 million, but 1.8 million of them were bought by existing venture backers, including Domain Associates, Intersouth Partners, and Polaris Venture Partners, which have put about $94 million into Alimera since it was founded in 2003. Most of Alimera’s IPO proceeds will go towards lead candidate Iluvien (formerly Medidur), an intravitreal implant containing the corticosteroid fluocinolone acetonide in Phase III for diabetic macular edema. An NDA is expected this quarter and if approved, it would be the first drug/device combo ever available for DME. pSivida developed the implant and licensed it to Alimera in 2005. In fact, pSivida will make out better than Alimera -- or its backers -- in terms of the IPO proceeds. Alimera must pay back $15 million of debt pSivida is holding, plus an additional $175k in accrued interest. And if Iluvien is approved, pSivida collects a $25 million milestone payment. -- Amanda Micklus

Biocartis: The Swiss diagnostics firm announced April 8 a €30 million ($41.3 million) Series B round, with two corporate investors, Swiss neighbor Debiopharm Group and Johnson & Johnson Development Corp., taking stakes. Debiopharm isn't just an investor; it will also partner with Biocartis to make companion diagnostics for its cancer and infectious disease treatments, with the Debio-025 Hepatitis C drug first in line. Biocartis plucked the diagnostic platform from Dutch conglomerate Royal Philips earlier this year for an undisclosed amount. Existing investors from a pan-European syndicate including Aescap Venture, Biovest CVA, Advent Venture Partners, and the Benaruca investment vehicle of Biocartis founder Dr. Rudi Pauwels' family underwrote the new round as well. Pauwels has worked with J&J before. The health-care giant bought two of his startups, Tibotec and Virco, in 2002. The financing is one of the largest for a molecular diagnostics startup since the downturn began. Nodality of Redwood City, Calif. announced a $15.5 million round in March that was led by yet another corporate funder, Pfizer Ventures. Hmm. Starting to see a trend? -- Paul Bonanos

AiCuris: ...and if you thought Biocartis's Series B was big, make way for Germany’s AiCuris, which raised €55 million ($75 million) in its Series B on April 14. The lead investor was Santo Holding, an investment company run by the Strüngmann family (also former owners of Hexal, now a Novartis division). Founded in 2006 as a spin-off of Bayer HealthCare’s anti-infectives cast-offs, AiCuris is led by Helga Rübsamen-Schaeff, PhD, former SVP of anti-infectives research at Bayer, and is developing treatments for viral and bacterial infections. Late last year, its lead candidate, AIC246 for human cytomegalovirus (HCMV), was shown to be well tolerated in transplant recipients and had comparable efficacy with valganciclovir. AiCuris has expressed interest in licensing the HCMV inhibitor -- as well as others candidate HCMV molecules -- to Big Pharma. So far, the company has forged one collaboration, an early-stage drug discovery deal signed in 2008 with fellow German/medicinal chemistry specialist 4SC AG. AiCuris is the fourth German biotech to raise venture capital this year, bringing the venture total for German biotechs just north of $100 million, according to Elsevier’s Strategic Transactions database. -- A.M.

NPS Pharmaceuticals: We highlight this Bedminster, NJ specialty pharma for its double duty: It has raised more than $90 million in a pair of transactions over the past two months. The most recent is a follow-on public offering of 10.35 million shares that closed April 21. The FOPO, which sold at $5.50 a share and included a fully subscribed overallotment of 1.35 million shares to the underwriters, netted NPS $53 million. Focused on rare gastrointestinal and endocrine disorders, NPS will use the money to continue registrational clinical trial programs for a pair of lead candidates: Gattex (teduglutide) to treat intestinal failure related to short bowel syndrome and NPSP558, a hormone replacement therapy for hypoparathyroidism. In its earnings statement last month, the company said top-line data from its Phase III STEPS trial for teduglutide are expected in late 2010 or early 2011. Also last month, NPS sold royalty rights to the hyperparathryroidism drug cinacalcet to DRI Capital for $38.4 million. Under the deal, DRI’s proceeds from the deal are capped at $96 million, or 2.5 times the upfront purchase price. -- Joseph Haas

Photo courtesy of flickr user Katie@!.

Lilly's $1 Billion Investment in Health Care Reform (Part 2): Remember the Upside

In part one we did our best to explain the relatively huge cost Lilly put on the impact of health care reform in 2010 and 2011, pointing out that the company is in effect a victim of its own success in defending Zyprexa from pricing pressure in the past.

But we also think Lilly's estimates about the cost of reform don't tell the whole story

Take the company’s forecast for 2011, with revenue guidance cut by $600 million to $700 million. There, in addition to the ongoing impact of the Medicaid rebates (so about $400 million or so), Lilly sees another $200-$300 million impact from the new market share fee in the US and from the start of the donut-hole discount program.

Now there is no escaping the fee, though as Lilly noted the exact amount is still tough to calculate. However, we figure Lilly’s share will be in the $100-$130 million range. That’s a real hit.

The donut hole discount, however, is another matter. There is no doubt that the 50% discount will show up in Lilly’s reports as a deduction from revenue (along with Medicaid rebates, chargebacks, etc.). It is just that the discount is also likely to induce wider use of brands in the lucrative Part D population.

But Lilly is not baking in any benefit from behavioral change in response to the donut hole discount. The company did say it is counting the potential benefit for products like Forteo where there is a relatively high percentage of patients who stop therapy in the donut hole, but noted that is a small amount.

It is very hard to predict whether prescribers and patients will start to use more brands knowing that the cost of the donut hole will be lower. Lilly's initial read is that a 50% discount won't be enough. Maybe they are right--but they may be wrong too.

The Congressional Budget Office certainly saw things differently: CBO estimated that the net impact of the donut hole discount in 2011 would be to increase federal spending on pharmaceuticals by something on the order of $1.0 billion. (The exact amounts are difficult to break out of the CBO score).

Could there be another Part D surprise upside in 2011? We will see.

And Lilly definitely didn't even attempt to quantify the intangible benefits of the law. For instance, the new 12 year data exclusivity granted to biologic products. That immediately makes Lilly’s pipeline more valuable, at a time when the company notes that “biotech molecules represent half of our late-stage Phase II and Phase III assets and over a third of our overall clinical portfolio.”

That’s not top-line revenue or bottom line earnings, but it is real.

And then there is that backloaded stuff in the bill. You know, the part where the federal government kicks in a share of the donut hole, basically paying back the market share fee in the form of coverage for Medicare Part D. And the 32 million new lives expected to gain insurance.

Thanks to reform, the federal government will be spending a lot more subsidizing health care in the years to come. ($934 billion more, according to CBO.)

Some of that money will pay for pharmaceuticals. Ten percent, say? That is a lot of dough. So Lilly will spend $1 billion over the next two years in hopes of big payoff in the middle of the decade.

Say, isn't that exactly what Lilly does? $1 billion is just one quarter's worth of R&D for Lilly, and we'd wager this billion is much more certain to deliver an attractive RoI than the average incremental billion spent by Lilly on R&D the past decade.

This is an industry used to making large investments over several years in hopes of an uncertain payoff. Health care reform requires similar patience—but with a more certain payoff.

flickr image by amy_b used under a creative commons license

Lilly's $1 Billion Investment in Health Care Reform (Part One): It's All About Zyprexa

With our unerring sense of timing, we just published an analysis of the health care reform bill explaining our view that the biopharmaceutical industry did really well under this law, even better, in fact, than we thought they would do when reform was all but done in January.

Then Lilly announces some rather astonishingly large cuts in its 2010 and 2011 revenue guidance--due to health care reform. This year, Lilly says, revenues will be down $350-400 million, and next year the hit will be bigger, $600-700 million. (You can read more in “The Pink Sheet” DAILY.)

Altogether that makes a $1 billion hit from reform. This is good news?

Ah, but it is. Really.

And we figured we should explain our thinking one more time, in the context of Lilly’s announcement (and the wave of follow-up guidance adjustments from biopharma companies big and small).

First off, it bears repeating that the reform bill is, by design, front-loaded on pain and back-loaded on gain.

Medicaid rebates increase this year and market share fees begin next year. Expanded insurance coverage doesn't really kick in until 2014. Industry knew what it was getting into when it decided to support health care reform: there would be a price paid up-front in order to see the new business from insurance expansion later on.

In other words, it isn’t so much a hit from health care reform, as it is an investment in a bigger US market. And we think the math works out wonderfully.

Now, bear in mind that Lilly is probably the company most affected by the front-loaded pain of reform, thanks almost entirely to its extraordinary Zyprexa franchise. The company, in effect, is a victim of its own success in holding the line on prices for its biggest brand.

Zyprexa was at one time almost exclusively covered by Medicaid (estimates were at least 70% of US sales). That profile meant that Lilly had no reason to engage in deep discounting in the commercial market, which would have meant deeper rebates to Medicaid under the “best price” rebate formula. So Lilly presumably paid the minimum rebate (15.1%).

The health care law sets a new minimum rebate amount (23.1%), which in effect increases the size of Lilly’s base rebate payments by about 50%. That probably explains most of the $350-$400 million impact in 2010. (The new law also applies rebates to the Medicaid managed care market; while that isn’t as big an impact it is still pretty big—in essence an increase from zero rebate to 23% or more for the Medicaid managed care sector.)

Other manufacturers probably aren’t as exposed to the change in the minimum rebate amount. Pfizer, for example, is about 50% bigger than Lilly in the US, but its product line is not as heavily covered by Medicaid in the first place, and its biggest product—Lipitor—is discounted in the commercial market and so probably already generates a rebate payment at or above the new minimum. (There will still be an impact on Pfizer, of course, but we won’t know how much until it reports in May.)

Don’t feel too bad for Lilly, though.

The relatively big impact on Zyprexa is primarily a function of the company’s success in staving off earlier efforts to extract deeper discounts on the brand. As Zyprexa’s impact on Medicaid grew early in the 2000s, many states tried to impose supplemental rebates on the brand. Those fights were starting to become more difficult when the Medicare Part D legislation came along, and as of Jan. 1, 2006, at least half of the Medicaid population switched to the new Part D coverage.

That meant an end to the push for supplemental rebates. It also meant a de facto one-time price increase on the brand, since Medicaid rebates also capture an inflationary price adjustment. In fact, Lilly and Zyprexa were probably the biggest beneficiaries from the launch of Part D in 2006. (See “Lilly Makes Part D Pay,” The RPM Report, January 2006.)

All of which underscores another point to remember when considering the estimates of the cost of health care reform: the alternative to the upfront hit from reform would almost certainly be a different sort of hit. So, for Lilly, the higher Medicaid rebate at least helped stave off the push to reclaim the Medicaid rebates on the Part D population.

There is no way to know for sure as an outsider, but we believe the hit from dual eligible rebates would have been bigger for Lilly than the hit it is taking now. All the more so if the dual eligible rebate were enacted solely as a revenue measure, not as part of comprehensive health care reform.

And it is possible to put a little context around the number. $1 billion is less than one-quarter's worth of Zyprexa revenues, and it is also less than the $1.4 billion Lilly paid to settle marketing investigations related to the product in 2009.

Then there is the matter of timing. Lilly sees a huge revenue hit in 2010 and 2011 from health care reform, but of course the bigger hit will come from the patent expiration for Zyprexa itself at the end of 2011. That could be a $2.5 billion drop in revenue in 2012.

Though on the bright side Medicaid rebates will go down...

Okay, we don't seriously expect Lilly to celebrate the loss of Zyprexa. But it does provide a useful reminder of what the company has to look forward to after 2011 as health care reform picks up steam. We'll explore that theme in Part Two.

image by flickr user ansik used under a creative commons license

gabe

Dear Gabe,

My heart is heavy as I sit down to write this letter to you. Another year has passed, another year without you. Today you would be two years old. I can’t believe it. You would be walking and talking and probably running me ragged. I would be the luckiest mommy in the whole world to have you here. I miss your warmth, your weight in my arms, your sweet face, your long dark hair, the feel of your skin on my finger tips, everything about you – everything I got to see and know, and all of the many, many, many things I didn’t.

I think, in many ways, it’s just getting harder. I see the new things Jonah is doing every day. I see his smile, hear his laugh, watch as he experiments with new sounds, clapping his hands, learning to crawl. And although I find joy in all the things he’s getting to do, I look at him and see all the things that I missed out on with you. Sweet Gabe, I ache for you.



I remember clearly the couple hours we got to spend holding you, touching you, seeing you for the first and last time. I remember joking about your mullet hair, your Grandaddy saying you were built like a football player – lean figure and broad shoulders (just like your dad, I might add), singing to you, and telling you goodbye.



I remember the day we buried you in the bright sunshine by the pond. I remember how when we first buried you, Daddy would leave bread by your spot so the geese would come keep you company. I remember Nana spending time with you in the early mornings. So much about those days is a blur and yet so much is astonishingly clear. I try to think about the joy and happiness more than the sadness – where you are and what you are doing now, how you felt no pain, how you went straight to Jesus… But sometimes, Buddy, sometimes those hard moments sneak in – the moment we found out you were gone, walking across the hospital parking deck toward the front doors, knowing I would have to deliver you but never get to see you open your eyes, having to let you go for the last time. Sometimes it’s too much to bear. There are nights I still lay my head on Daddy’s chest and cry for you, long for you and mourn for you just like I did the moment we found out you were gone. The selfish part of me screams, “I want you back!”



But the unselfish part of me whispers gently, “I would not bring you back if I could.”



I can’t lie, Gabe. You took a piece of me when you left. I will never be whole this side of Heaven. Very soon I’m coming for the piece of my heart that you stole. I know you are holding it for me. But I also know you are not waiting. What is time to you? Every day you spend with God, Jesus, the angels, our friends and family who’ve already entered the gates. I know you know me and you know my love, but you do not miss me. And I’m so glad about that. I don’t want you to live your life in need or want or yearning. And the beauty is – you don’t have to. You live completely fulfilled, joyously happy, never lacking. Your life is perfection. And when I do finally make it to Heaven, you will look up, blink, and say, “Oh, there you are,” as if I’ve just stepped away and come right back. And guess what, Baby Gabe, we’ll have ETERNITY to hang out and play and run and jump and sing – we can do anything you want. You’ll have had a head start, so you can show me all the best stuff and take me to the coolest places. And best of all, we’ll get to rest at the coolest place there ever was – the feet of Jesus.

Daddy and I were talking a couple nights ago about you being in Heaven. I told him that for some reason I picture you as a four or five year old boy, being crazy and wild and running all over the place. I don’t know why. And I don’t know what you really look like now, but I do know that I’ll recognize you. And over and over and over again I imagine the moment I hear, “Well Done,” and I enter the gates, and there you are. And you’re holding Jesus’ hand, but his eyes stare into mine, and he squeezes your hand, and lets go. And you run to me, and I squat down and grab you into my arms, and I hug you so tight and just breathe you in. And we laugh till we cry and spin in circles. And you say, “Oh, there you are,” and I say, “I’m here to stay.” And then you introduce me to Jesus. And even though I’ll be officially meeting him for the first time, it will feel like we’ve been together forever, and it will be the dream I’ve wanted for so long.

Come, Lord Jesus.



I hope you know how much I love you. I hope you can feel my love and that it’s just icing on your Perfect. I know you are happy and healed and free. And I am so thankful. But I miss you and tears roll down my face thinking of all the things we’ll not do here on Earth. But I hold onto hope and the promise that I’ll see you again. Daddy, Jonah, and I just can’t wait to finally all be together as a family with you. Please know that we love you, pray for you, and each day we live is one day closer to you.

And don’t worry. We certainly aren’t living all mopey and sad down here. Don’t get me wrong, there are moments full of anguish and terrible sadness. But we cling to the joy and the hope and the promise, and Jonah does his part to keep us laughing. I see you in him, Gabe. Sometimes I look at him a certain way or take a photo from a certain angle, and it takes my breath away. And for that moment, I have you back. And then you’re gone again and life just keeps trucking on. And that’s the way it should be I guess – the only way to survive. But I refuse to JUST survive. I’ll live for you and love for you and do everything I can to make you proud of me. Please ask Jesus to help me, Gabe. You know I can be impossible to deal with. Your poor Daddy. He’s so patient. And I know he just wants to live the kind of life you’d be proud of too. You are so much a part of us, even when we aren’t openly talking about you, you’re in the air we breathe, the thoughts we think, and you even still visit us sometimes in our dreams.

I was going to say that we love you more than you could ever imagine, but the beauty is that you know a much greater and more perfect love than WE could ever imagine or could ever give you. And for that, I’m thankful.

And we can’t wait for the day the veil is lifted, and we know that perfect love in its fullness too. But until that day, you live in our hearts, Sweet Gabe. We pray for the day we can hold you again, and while we wait, you just keep holding on to Jesus. Because that’s who we’re holding onto too. We’ll see you soon, Love. It’ll just be a minute.

Happy 2nd birthday, Sweet Baby Gabe.

All my love forever and ever and ever,
Mommy

Gabriel Matthew Williams

April 22, 2008
3:11 am
6 lbs 14 oz
20.5 inches