BioSpace BioPharm Exec
Tuesday, July 21, 2009
Sunshine, Lollipops, and Exclusivity

I don't like being a downer, but for the past year or so, that's been an unavoidable hazard of digesting the month's news. So it's nice to see a month like July, which has ushered in plenty of good news for the biotech sector. Witness a continuing uptick in financings--real, public secondary offerings, plus some private placements. It wasn't long ago that CEOs pretty much had to go to donate plasma or host a bake sale if they wanted to raise cash for their companies. Then there are some high-profile drug approvals, some positive clinical news, a friendly face at NIH, and some nice deals. Ah, summer!

But much of this pales in comparison to the big news on Capitol Hill, where legislators on the Senate Health, Education, Labor and Pensions Committee recently approved a follow-on biologics bill giving innovator companies a big 12 years of exclusivity. It will now join the larger healthcare reform bill working its way through the Senate. The Biotechnology Industry Organization officially wanted more, of course, but they have to be mighty pleased with this outcome. The Obama Administration favors just seven years as representing a "generous compromise" between industry's desires and the determination of the Federal Trade Commission that innovators don't actually need much of anything in the way of additional exclusivity. But it seems unlikely that the 12-year provision will be a deal-killer if it is in a bill that ultimately reaches his desk.

Mind you, this fight isn't over. House Energy and Commerce Committee Chairman Henry Waxman still backs a five-year period, but Rep. Anna Eshoo (D-CA) is taking the fight for a longer exclusivity period to the House, with a showdown between Waxman's approach and her more widely sponsored bill perhaps taking place by the time you read this.

Personally, I think biotech companies are very, very lucky to score this kind of exclusivity. Follow-on biologics involve a lot of complexity that will limit the number of competitors (as the Federal Trade Commission pointed out last month) and that make them more amenable to add-on patents that can extend monopolies. And there are other reasons while biologics, in my opinion, deserve less rather than more exclusivity than conventional drugs. But it's also probably not quite as big a deal as both sides are making it out to be, since exclusivity after all runs concurrently to patent protection, and in most cases patents should provide the greater protection.

In any case, a follow-on biologics bill is closer to reality now, and it will be interesting to see how this space opens up. Right now, a handful of companies look well-positioned--Teva and the Sandoz division of Novartis, most notably. But Merck has been looking to get involved with its acquisition of a follow-on biologic portfolio from Insmed. It seems likely that most conventional generics companies won't be able to compete in this brave new world.

--Karl Thiel

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Denosumab is Amgen's most important pipeline product, and the company had a lot riding on a head-to-head phase 3 study meant to prove it wasn't inferior to the Novartis drug Zometa in minimizing bone damage related to breast cancer. Turns out Amgen went one better: The drug came out looking superior to Zometa in delaying the time to skeletal-related events. This better-than-expected result follows better-than-expect results last year in post-menopausal osteoporosis, where denosumab will probably get its first approval. And Amgen may well prove better at marketing the cancer indication, where it has gobs of experience, than in clawing share from the crowded (but large) osteoporosis market. Kudos, Amgen!

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It's nice to see some capital finally get off its lazy butt to do some work. The nascent uptick in financings noted last month continues, with more companies raising capital both privately and publicly. But the most intriguing proposed financing comes from comparatively cash-rich Vertex Pharmaceuticals, which says it intends to sell the future European milestones on its hepatitis C drugs telaprevir. In other words, the company will gladly have you pay it today for $250 million it expects to receive Tuesday. So how much will someone pay for that promise? Less than $250 million, obviously, since there is some finite risk that Vertex will never receive its $100 million regulatory filing milestone or its $150 million approval milestone. But how much less? I really can't wait to find out. It will be a fantastic lesson for analysts in how the real world discounts the prospects of approval for a late-stage drug generally viewed as very likely to be green-lighted. -KT

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It's no big surprise that Effient (prasugrel) won FDA approval, but there's still got to be a lot of relief in Indianapolis, where Lilly execs have been counting on this anti-clotting drug to bolster company revenues as other key products go off patent. Some 11th-hour controversy about potential conflicts of interest on the FDA advisory panel, and a letter from one of the drug's inventors urging FDA not too approve it, turned the heat up a few degrees...but Lilly and Daiichi won the day. AMAG Pharmaceuticals, too, won its long battle to get Feraheme on the market, which was delayed last year due to manufacturing issues. Though it doesn't have much else, AMAG should be able to ride this intravenous iron supplement to some nice profits. -KT

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Karl Thiel is an analyst for The Motley Fool, a columnist for BioWorld Today, and a contributor to Nature Biotechnology. He lives in Portland, Oregon.

You may contact Karl Thiel at Karl.thiel@biospace.com.

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