The More The Money-er

The more Epogen, that is.

Just when you thought it wouldn't get any worse for Amgen, a new study published in the Journal of the American Medical Association suggests that for-profit dialysis chains are routinely administering higher doses of Epogen than necessary, thanks to the incentivizing nature of Medicare reimbursement.

Larger doses mean more cash for the dialysis centers, but may boost red blood cells beyond what FDA considers safe. New guidelines suggest going beyond the recommended maximum 12g/dL may cause "an increased number of deaths and of non-fatal heart attacks, strokes, heart failure, and blood clots." All four of the largest for-profit chains administered siginificantly more epoetin than the largest non-profit chains, according to the study.

The more epoetin used in dialysis-related anemia (where the market is all Amgen's), the more profit. And epoetin use is certainly on the rise. According to the study:

"... between 1991 and 2005, the mean dose of epoetin increased about 4-fold in dialysis patients. Today, epoetin therapy is the largest single Medicare drug expenditure totaling $1.8 billion in 2004 (an increase of 17% from 2003) and epoetin comprised 11% of all Medicare ESRD costs."

As we noted last week upon the escape of Amgen CFO Richard Nanula, and as the usual suspects in the pharma blogosphere point out, things are far from rosy at Amgen these days, where the stock is at a 2-year low. FDA warnings, safety concerns across the board, lawsuits, even potential biogeneric competition: Amgen's EPO franchise is under siege. We'll take a look at where the Big Biotech will turn next in the May IN VIVO.

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More Insulin Problems

Pfizer isn't the only company having problems with an alternative delivery form of insulin.

Emisphere Technologies has been working on oral insulin for more than a decade--and finally its board got fed up.

In October 2006, the company reported disappointing Phase II results with its oral insulin--no difference from placebo. The stock tumbled by more than 50%. By January the long-time CEO, Michael Goldberg, MD, was out. The firing was led by Mark Rachesky, who joined Emisphere's board in 2005 when his fund, MHR Institutional Partners, loaned the company $15 million, later changing the straight debt to a convert--at $3.78 a share. That's unprofitably close to the company's current stock price (and less than half the Emisphere price when Rachesky did the covert deal).

Goldberg was blamed for poor execution of the key trial (as well as the fact that the company hasn't made much progress in its nearly nineteen years of life). The original trial design called for the oral insulin to be tested in very sick but stable patients; to accelerate the enrollment, the company apparently relaxed the criteria. In a subsegment look at patients who met the original criteria--an often unreliable analysis--oral insulin apparently did perform well. But now the company needs a new trial to prove the point. And this isn't the first trial that wasn't well executed: its oral heparin test was hurt by a poor liquid formulation whose taste turned off patients.

The company is by no means dead--it's managed to hire a new CEO, Michael Novinski, the former president of Organon USA. And it's brought on a board of big-name diabetologists to advise it on trial design and execution. It's got a new formulation with apparently three times the absorption of the older version--thus reducing cost-of-goods and increasing patient convenience.

But oral insulin won't win on convenience. And it won't win by eliminating the pain of injections. New smaller needles make taking insulin relatively painless. The big advantage will be eliminating embarassment, says one insider: "What diabetics hate is at a restaurant having to pull up their shirt and stick themselves in the stomach with a needle." Exubera doesn't solve that problem: puffing on a big device is no less inconspicuous than sticking one's belly with a needle.

A pill should be a lot more acceptable. And yet that's not enough. The market for insulin reformulations is being shaved by better needle technology and by new products, like the injectable Byetta and the oral Januvia. And as Pfizer is learning from Exubera, managed care doesn't want to pay for convenience. Emisphere's product, to be truly important, will have to show better outcomes. It may be able to get on the market by showing equivalency to injectable insulin--but to make Emisphere, and oral insulin, a success, it will need to keep diabetics healthier, too. That's a much more expensive task than most proponents of oral protein delivery ever figured they'd have to accomplish.

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Strategic Alternatives: MedImmune Edition

Medimmune is exploring strategic alternatives, including a possible sale of the company, with the help of bankers Goldman Sachs. Investors apparently like the idea: MEDI shares (already up 20% in the past couple months) are up more than 12% this morning and knocking against five-year highs, and the company's valuation has broken through the $10 billion barrier.

And why wouldn't they? All signs point to sweet takeout valuations by pharma desperate to beef up pipelines. Schering's takeover of Organon is in the same ballpark, valuation wise, and while Medimmune can't boast five products in Phase III studies like Organon, it's pipeline is arguably broader and deeper. Plus Medimmune operates in vaccines and biologics, two sought-after capabilities in Big Pharma these days, and is growing at a nice clip: on Monday the company announced that it expected first quarter earnings to triple over 2006.

MedImmune has suggested it is interest from certain pharmaceutical companies and dissatisfaction on the part of certain shareholders (i'm looking at you, Carl Icahn) that led to the move.

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Amgen's CFO: Escaping a Sinking Ship?

It may have been a coincidence. But Amgen CFO Richard Nanula's timing in announcing his departure this week to "pursue other opportunities" raised some eyebrows. The Amgen ship is under attack as it has never been before, and the list of invaders is long: clinical setbacks (think Vectibix), safety concerns over key drugs (think black box warnings on Aranesp and Epogen), SEC scrutiny (into whether the firm divulged Aranesp data on time), competition (generic and otherwise) to its multi-billion dollar anemia franchise, and lawsuits (Johnson & Johnson on marketing contracts, Roche on Micera).

No wonder Nanula is fleeing. The numbers have turned bad: annual profits fell 20% last year. More than $20 billion has been wiped off the group's market capitalization in the last six months. Investors are abandoning a once-favorite stock, prompting some analysts to speculate on whether Amgen is a takeoever target.

It's not all doom and gloom (certainly not for Nanula, anyway, who after six years as CFO doubtless would like more time to spend whatever's left of his $8 million 2006 compensation package). Amgen is still, valued at $60 billion or so, larger than many Big Pharma firms. Vectibix, although wounded, isn't dead. The Aranesp scare--a higher risk of death among cancer patients no longer on chemo--applies mostly to a small segment of patients, for which the drug is not officially approved anyway (and now won't be).


Still, the invadors are real, and Amgen is starting to look mightily dependent on one particular asset in its late-stage pipeline: denosumab, a potential blockbuster drug to treat osteoporosis (and, Amgen hopes, a tonne of other diseases, including cancer). As one analyst puts it: "God forbid anything should happen to denosumab".


Indeed. But God didn't help Vectibix much: this was the star drug, touted as a potential $2 billion product, that drove Amgen's $2.2 billion acquisition of Abgenix in December 2005. Vectibix is approved for third-line colorectal cancer, but 2007 sales were less than $200 million, and aren't forecast to get much higher.


For now, Amgen is busy defending its marketed portfolio. But senior management should consider taking Nanula's departure as a cue to start more visibly putting energy into Amgen's post-EPO future rather than its shaky present. Perhaps Nanula's successor, former investment banker Robert Bradway, will have less trouble dealing with a period of less than stellar growth. He's only been with Amgen a year.

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Take a Deep Breath, Pfizer, and Think Again

It's just what Pfizer didn't need: another expensive failure.

Less than six months after the much-vaunted Lipitor-replacement torcetrapib tanked, it's now official that the Exubera launch is a flop. The numbers say it, the newspapers say it, and even Pfizer’s own executives acknowledge that “we still need to figure out how to market Exubera.”

Not surprising, perhaps—Pfizer isn’t exactly a large molecule expert, and Exubera, as the first ever inhaled insulin, presents even more challenges for its sponsor than your average biologic.

First, doctors must be convinced of the drug’s advantages over existing treatments; not just longer-acting insulins such as Levemir, marketed by diabetes-leader Novo Nordisk, but also since late 2006, Merck & Co.’s star DPP-4 inhibitor sitagliptin (Januvia), a rare industry success story (to be followed by recently-approved Janumet, a combination of Januvia and metformin).

Then, time-constrained docs must learn how the inhaler device works (and adapt dosages, which are different when insulin is inhaled rather than injected). If they get past that hurdle--and aren’t swayed by detractors such as Dr. John Buse, president-elect of the American Diabetes Association, who says that Exubera may present a safety risk in Type I diabetics--then their patients must get used to carrying an umbrella-sized device around with them (and paying more for the privilege: Exubera costs $2-3 more per day than injectable insulin).

So Exubera is being chosen for just one in 500 insulin prescriptions in the US, despite Pfizer’s investment—900 part-time diabetes educators, over six months of doc-targeted marketing, and considerable sales rep resource, in part diverted from other more profitable drugs. Analysts have slashed Exubera sales forecasts, in some cases to barely more than $300 million by 2012.

But Pfizer’s not giving up. “Don’t write Exubera off,” warns a senior executive at Pfizer. “We’ve screwed up before on launch, and the drug has come back.”

The company will soon launch a fresh marketing campaign, a summer DTC advertising splurge (very unfashionable), and reckons that transferring Exubera promotion to its highly successful CV team might make the difference.

Chances are it won’t. Marketing inhaled insulin—effectively a niche drug, despite initial forecasts of peak-sales of up to $2 billion—isn’t like marketing a primary care pill. You can’t use the same tricks.

“Patients will be inhaling insulin over the next few years,” insist Pfizer executives. Sure, but how many, and whose product? By the time Pfizer figures out its promotional game, competition will be even worse, even if there is a market. The handful of inhaled insulin alternatives in Exubera's wake have smaller, more discreet devices, and will benefit from Pfizer's experience in figuring out how to make breathing in one's insulin more attractive than injecting it.

“You may wonder whether Exubera could be right for you,” says Pfizer’s product website to prospective customers. Despite its brave face, Pfizer must be wondering whether this drug is right for it, too.

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Everybody Plays, Everybody Wins

Theravance's November 2002 deal with GSK around long-acting beta agonists (the heart of GSK's blockbuster Advair franchise) was designed to foster cooperation and trust between the partners. The two companies' assets were pooled--in this case four molecules from each side--and a potential conflict of interest was avoided: no matter which of the eight LABA candidates was chosen as GSK's best bet, Theravance would get paid (though the economics were slightly different, depending).

For Theravance, it was a smart move. Yesterday the companies announced results from two Phase IIb trials for two once-daily LABAs, one from each company's stable, and GSK's 642444 came out on top.

As a result, Theravance (whose 159797 candidate also posted positive results in Phase IIb) will have to pay an undisclosed milestone to GSK upon '444's approval. As we wrote at the time, this eventuality was built into the deal: royalties paid to Theravance are solid (an estimated 13% of the first $4 billion in sales of the LABA alone and the LABA/corticosteroid combo product--the Beyond Advair program--and 9% on sales over $4 billion) and should allow the biotech to establish a line of credit without too much trouble.

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Novartis' Irritable Blockbuster Syndrome

Novartis has a Zelnorm problem.

Not anymore

The Swiss drugmaker suspended sales of the IBS drug on Friday at the behest of the FDA, which wants an advisory committee to weigh in on the significance of a safety signal unearthed in an 18,000 patient retrospective analysis of trial data. Novartis sold $561 million worth of the drug in 2006.

The data suggested Zelnorm patients were more likely to experience an ischemic cardiovascular event than placebo patients (one in one thousand for the Zelnorm group, one in ten thousand for the placebo group), though Novartis has noted that the rate in the treatment group more closely hews to the rate in the general population and each of the effected patients had other risk factors for such events.

Analysts have removed Zelnorm sales from their models, for now, awaiting FDA's decision.

IBS has been notoriously tricky for pharma, though the massive potential market size has meant no shortage of compounds in development. Only Nelnorm and GSK's Lotronex have made it to market in the indication, neither has been particularly successful, each has serious GI side effects, and now each has been pulled from the market--albeit temporarily. Lotronex was yanked in 2000, nine months after launch, and returned to a much narrower market by popular demand in 2002 with a black box warning.

Zelnorm's suspension is potentially temporary--which would mean less of a liability headache for Novartis even if sales never recover. Lotronex's did not--though the safety concerns for the two drugs are very different.

(Graphic from "Building a Business in Drug Safety," Jan. 2006, The RPM Report)

But sources close to Novartis note that the company had originally asked FDA not to simply pull the drug—but to contraindicate its use, with a black-box warning, for at-risk popualtions: older women and those with cardiovascular risk factors. The drug still should be available, Novartis argued, for younger women (roughly 40% of its users, who usually get severe constipation during menstruation).

FDA said no. Until the situation is more clearly understood, there was no reason to run the risk: IBS isn’t a fatal disease; there are—inadequate—alternatives; better safe than sorry, said the Agency.

Novartis was in no position to disagree. But it must be feeling picked on: the Zelnorm suspension is its second bit of bad regulatory news in weeks. Even worse: FDA’s “not yet” on Novartis’ most important pipeline drug, Galvus, back in January – while giving Merck’s competitive Januvia and Janumet the all clear – and what is likely an insuperable competitive lead.

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