Should Pfizer buy Wyeth?

Pfizer has reached the top of the pharmaceutical ladder in large part thanks to mega-acquisitions. The Warner Lambert acquisition most notably brought Lipitor which Pfizer grew into a $ 12 billion brand. The acquisition of Pharmacia brought a more diversified portfolio, although Celebrex felt to reach full blockbuster status because of post-marketing safety issues.
Yet, despite a $ 7+ billion budget, Pfizer’s R&D productivity has remained dismal, with no blockbuster or not even enough product launches to replace Lipitor when it loses its patent starting in 2010. Bigger was not better in pharmaceuticals, or at least it was not sustainable.
Under the new CEO Jeffrey Kindler, Pfizer promised to re-invent itself, targeting specialty areas and re-deploying its legendary mass marketing approach into a more focused customer-centric communication.
Wyeth has a gone the same trajectory, although from a smaller revenue base, building specialty mega-brands, such as Arthritis biological drug Enbrel and pneumoccocal vaccine Prevnar. Wyeth’s oncology pipeline is also particularly promising, in particular breast cancer drug neratinib (HKI 272) which has the potential to reach over $ 3 billion in sales.
Analysts like the Pfizer-Wyeth combination, because it strengthen the Biotech portfolio of Pfizer. At $ 50 a share, or $ 65 billion valuation, Wyeth is still considered a good buy.
The official agreement to merge could come as early as next week. Once a gain, Pfizer will buy its way in, but doubts remain that this will transform its corporate culture and make a more nimble company with a productive R&D.

Biotech Winners of 2008 and Early 2009 Outlook

Biotech proved to be a defensive investment with the Dow Jones Biotech Index up 4% in 2008 while the overall DJ Market Index was down 39%. The NASDAQ Biotech Index resisted better at -16% than the overall NASDAQ Market Index which fell 42%. No less than four Biotech companies figured among the top 10 Gainers of 2008 on Wall Street.

Vertex (NASDAQ:VRTX) was the top performer on the NASDAQ 100, up 27 % at $30.15, on the promise of its $ 75,000 a year treatment for Hepatitis C and a robust and well partnered portfolio.

Genentech (NYSE:DNA), boosted by revenue growth of its blockbuster portfolio and Roche’s offer to acquire 100% of the company, was up 24% at $ 89 a share.

Amgen (NASDAQ:AMGN) was up 24% on the promise of denosumab, an osteoporosis drug awaiting FDA approval, which reduces spinal fractures in post-menopausal women and is expected to reach peak sales of $ 2 billion.

Celgene (NASDAQ:CELG), now a fully integrated global bio-pharmaceutical company, was up 20% at $ 55.28, on continued growth of Revlimid and the integration of the Pharmion acquisition.

Gilead (NASDAQ:GILD) was up 11% at $ 51.14, on strong sales of its robust HIV portfolio.

Among the Mid caps, a special mention goes to ViroPharma (NASDAQ:VPHM), up 63.7% at $13.02.

ViroPharma continues to maintain strong sales of Vancomycin, still without generic competition, is moving forward with phase III trials for Camvia, its promising treatment for CMV infections and completed the $688 million acquistion of Lev Pharmaceuticals, giving it access to Cinryze, a treatment for hereditary angioedema, approved by the FDA in 2008.

Clearly, Big-Cap Biotech is a winner, replacing Big Pharma as a defensive investment. It is still growing fast. It is also much less vulnerable to generics, even if bio-similar legislation, increases competition for the more mature Biotech products.

Mid-Cap Biotech, with a combination of revenues and pipeline, is also well positioned for 2009, both as an acquisition target for pipeline-hungry Pharma and as a selective acquirer of smaller public and private biotech companies looking for a safer heaven in a challenging capital raising market.

Just like every year, Investors and Executives will convene at the JP Morgan Healthcare Conference to be held January 12-15, 2009 at the Westin St Francis in San Francisco, CA.

More insights to come soon!

Will the VC Liquidity Crisis put a Stop to New Venture Financing?

The second quarter of 2008 has been dry for Venture Capitalists. No IPOs, only very few M&A exits. Actually just one is Biotech: the acqusition of Xanthus Pharmaceuticals by Antisoma plc for $ 53 million.

If we include the first quarter of 2008, there were only 5 venture backed IPOs yielding a meager $ 283 million, versus $ 6.3 billion for 70 million in the fisrt half of 2007. Disclosed Venture backed M&A deals went from 169 down to 120 and the total investor value from $ 8.5 billion down to $ 6 billion during the same period. This is a 42% drop in deal value.

It is unclear how long the Tech Crunch will last. For some sectors , bootstrapping or reaching out to angel investors may be a way to get started. It is much more concerning for new ventures in the Biotech sector, which require more capital and have a longer road to revenues. Let’s hope that VCs will look beyond the short term economic outlook and remember that most Biotech investments require a 5+ year vision, long enough for a turnaround of the economy.

Biotech beats the Stock Market in 2nd Quarter

Biotech companies defied the gravitational pull of the global capital markets during the second quarter, as some of the major biotech indices finished in positive territory while other financial benchmarks declined.
The BioCentury 100 Index ended the quarter up 3.7%. The NASDAQ Biotechnology and AMEX Biotechnology indices also were up on the quarter, posting gains of 1.6% and 0.1%, respectively. The NASDAQ Composite Index was up 0.6%, while the AMEX Pharmaceutical Index was down 1.5%, the S&P 500 was down 3.2% and the Dow Jones Industrial Average lost 7.4% in the quarter.

source: BioCentury

Myriad Genetics to Refocus on Molecular Diagnostics and Personalized Medicine

Myriad Genetics (NASDAQ:MYGN) is ending its venture into drug development. Its Alzheimer’s drug, Flurizan, did not show benefits in phase III, barely a surprise following unconvincing Phase II trials. Fortunately for Myriad Genetics, it has already recouped the $ 68 million invested in phase III thanks to an agreement selaed last May where Lundbeck paid $ 100 million for Flurizan European rights.
Myriad’s lead compound is now Azixa (MPC-6827). The apoptosis-inducing compound is in Phase II testing to treat glioblastoma multiforme (GBM), melanoma with brain metastases and non-small cell lung cancer (NSCLC) with brain metastases. Myriad received exclusive rights to Azixa from EpiCept (NASDAQ:EPCT),
Discontinuation of Flurizan will allow Myriad Genetics to show a profit of $ 0.35 per share on 2009 sales of $ 315 million according to analyst consensus. On June 30, MYGN was down 5% at $45.52 a share and market cap was $ 2.03 billion.
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However, as “personalized medicine” becomes increasingly prevalent, companies like Myriad Genetics are likely to be winners, enjoying rapid growth and high profitability.

Is Takeda overpaying by offering $ 9 billion for Millenium?

Takeda is offering almost $ 9 billion for Cambridge, MA based Millenium Pharmaceuticals. This is a 53 % premium on yesterday’s closing price. Millenium’s only commercial drug is Velcade, which competes with Celgene’s Revlimid. Recent favorable clinical trials are supporting a sustained revenue growth of at least 20% for Velcade. Johnson & Johnson is marketing Velcade outside of the US and co-promoting in the US.

However with only 6 years patent life left, the value of Velcade is probably in the $ 2-3 billion range based on discounted cash flow calculations. That leaves a $ 6+ billion valuation for the early pipeline – no product is beyond phase II. This is very high but maybe a similar situation to AstraZeneca beefing up its biologics capability and pipeline through the $ 15 billion acquisition of Medimmune.

Big Pharma, including Takeda- with Prevacid and Actos patent expiring soon- is facing a huge cliff in the early 2010s and betting on specialty products and biotechnology. With more deals to come,  valuations for quality biotech companies should fare well in a depressed stock market.

Pharma edges its political contributions between Dems and Republicans

According to the Center for Responsive Politics, Pharma edges its 2008 political contributions between Democrats and Republicans. This is a departure from the last 15 years where Republicans have always been favored. It is interesting to note that GSK, Abbott, Schering Plough and Novartis in that order continue to lean Republican while Johnson & Johnson and Roche make 2/3 of their contributions to Democrats.

While pro-business, former Bain Capital top exec, Matt Romney was an early favorite, McCain ambiguous statements toward Pharma, have had the industry hedge its bets toward Democrats. Obama slightly leads Clinton among Democrats.

Healthcare Policy will clearly continue to be high on the agenda of candidates in a year where recession fears and reality make voters very responsive to promises of better health coverage. We shoud therefore expect the debate to heat up and hope the industry can be pro-active in supporting realistic solutions.

Is it time to buy Schering Plough stock?

Shares of Schering Plough (NYSE:SGP) and Merck & Company (NYSE:MRK) have dropped 40% and 25% respectively since January 2008 when first news of negative results were made public. The downward spiral accelerated in the past week since ENHANCE was presented at the meeting of the American College of Cardiology. Full publication and comments have published in the New England Journal of Medicine.

Schering Plough CEO Fred Hassan did not wait more than a few days to announce a major restructuring, including 5 500 lay-offs of 10% of worldwide staff, for total annual savings of $ 1.5 billion. mostly in the US.  That gave an immediate boost to Schering Plough stock which jumped 11% on Thursday to $15.32 having hit a record low of $ 13.83 the previous day.

Yet, Wall Street worries that that may not be enough and that Vytorin and Zetia will never recover the $ 5.2 billion in sales reached in 2007. However some analysts are bullish at the prompt reaction of Fred Hassan to cut costs, accelerate Organon’s integration and improve productivity. Credit Suisse C.Arnold reaffirmed an “outperform” rating and a target price of $ 32. Others like Mad Money’s Jim Cramer also sticking with Schering Plough stressing that SGP trades at less than 10 times earnings, that the company is valued at the price of Organon plus Remicade sales, while it has another $ 15 billion in sales and the second best short term pipeline in the industry based on potential launches in the 2008-2012 period.

Will Negative Media Hype on Vytorin eventually harm patients?

Is the media hyping the negative result of the ENHANCE study beyond the actual scientific evidence available? We believe so, and so does FDA’s Center for Drug Evaluation and Review Office of Medical Policy director Robert Temple.

In an interview with FDAWebview, he comments: “The only ‘finding’ I’m aware of is failure to show an added effect on carotid plaques, a surrogate endpoint at best, and one that rates, as a surrogate for predicting coronary events, in my book below LDL cholesterol, in a study that was far too small to be an outcome study. It does appear that the ezetimibe did lower CRP (c-reactive protein) some, something many people would think desirable.”

Dr Temple is also concerned that the continuing backlash on cholesterol drugs may affect the use of statins:” As the recent Crestor story remind us (for people without known cardiac disease, by the way) we sure do know it is beneficial and people who need that treatment will pay with their lives if they’re encourage to avoid treatment”.

The bottom line is that, while full outcome data will not be available for several years, Vytorin is safe and physicians may want to consider the glass half full and offer the potential additional benefits of ezetimibe in addition to simvastatin to all appropriate patients.

Genentech Upside Confirmed after FDA Avastin decision

As anticipated by Biobusinessblog.com on January 1 (Genentech: Biotech Stock of 2008) and February 10 ( will the FDA approve Avastin for Breast Cancer), the FDA has put Genentech and Roche’s Avastin on accelerated approval track pending the results of breast cancer study RIBBON 1 later this year confirming the favorable data of AVADO already shared with the agency. It is anticipated that the FDA will focus on Progression Free Survival with a positive trend for Overall Survival.

The Breast Cancer labelling has the potential to add $2-3 billion to the yearly sales of Avastin. Genentech (NYSE:DNA) closed at $71.60 on Friday, gaining $ 5.80 in after hour trading to $ 77.40. We expect that DNA will move rapidly over       $ 80 a share supported the Breast Cancer indication for Avastin and future upside with Avastin in Colon Cancer and Rituxan in Lupus and Multiple Sclerosis.

Cancer-Sensing MicroChip to help Real Time Treatment Decisions

 

Circulating tumor cells (CTCs) are cells from solid tumors that circulate in the bloodstream at a rate of approximately one in a billion.  As such, these cells are extremely hard to acquire and require large quantities of blood.  A new microchip technology, relying on a novel geometric shape at the nano-scale, is able to detect, capture and analyze CTCs with a 99% rate and using less than one-thousandth the volume of blood.  This test is invaluable for providing real-time information for treatment decisions, assessing treatment response, identifying risk factors and early detection of cancers.  As of yet this chip has successfully isolated CTCs from lung, colorectal, pancreatic, breast, prostate and esophageal cancers. Find more in Mass General’s press release.

Posted by Milly Ray, PhD candidate, Harvard Medical School

Breakthrough in Stem Cell Research Provides Means for a Novel Form of Gene Therapy

Recently, scientists have discovered a technique to “reprogram” adult human and mouse cells to revert into induced Pluripotent Stem (iPS) cells. These cells exhibit the defining characteristics of ES cells and are essentially indistinguishable by all standard tests used to verify developmental stage in cells. The technique employs a retrovirus to insert four inappropriately active genes into the adult genome, initiating massive nuclear reprogramming into an ES cell-like state. Former techniques, such as nuclear transfer employed to create Dolly, ubiquitously failed because the adult DNA (chromatin) structure was not reprogrammed to resemble the structure of embryonic chromatin, resulting in improper gene expression.

This innovative and new technique must undergo significant testing before it can be used in any form of clinical trial: in particular, the use of a retrovirus causes a high risk of cancer, since the virus integrates randomly into the genome. However, this technique provides a novel vector for gene therapy which has the potential to be developed into treatments not limited to: cancer treatment, replacement therapy in degenerative diseases and organ replacement without donor-rejection complications. In mice, Rudolf Jaensich of MIT has already harnessed this technology to physiologically cure sickle-celled mice free of any initially discernible side effects.

Posted by Milly Ray, PhD candidate, Harvard Medical School

Should Pharma vote for McCain, Clinton or Obama?

Traditionally, the Republicans have been more favorable to the Pharma Industry. So, is a McCain vote a no brainer in 2008? Maybe not:  Senator John McCain (AZ) casted the industry in a not-so-flattering light while discussing why Americans can’t import drug from Canada. Mitt Romney jumped in, “Don’t turn the pharmaceutical companies into the big bad guys.” McCain responded: “They are.”Mitt Romney, clearly the candidate with the best understanding of Healthcare and Pharma, has now suspended his campaign, in light of McCain triumph on Super Tuesday.

Let’s turn the table: are the Democrats still the bad guys for Pharma? The first Hillary Clinton Healthcare Plan when Bill was President, has left bad memories. Hillary’s plan in 2008 clearly spells out universal healthcare coverage but with freedom of choice for the insured. Obama is less specific but supports the same principles.

On drug pricing, all three McCain, Clinton and Obama are favoring government regulation. Even Republicans are likely to target drug prices under Medicare part D. For more on candidates position on healthcare, check  Healthcare’08 .

As a result, Pharma is playing a bi-partisan card, evolving from 2/3 donations in 2004 to the Republicans to 50/50 with the Democrats in 2008. This is a pragmatic approach, since Pharma is most likely to have to work with a Democratic President. Only a united and pro-active industry position to address real issues, including that of the uninsured, will save US Pharma from a European or Canadian-style Healthcare System and a rapid decline of the industry competitive position.

Will Genentech’s Avastin be approved on February 23, 2008 by the FDA for Metastatic Breast Cancer ?

While the FDA Advisory Committee voted 5-4 last December, against approval of Avastin in Metastatic Breast Cancer, one of the committee members may have changed his vote, leading to a 5-4 in favor of approval, according to a recent Conference Call of Roche. Roche is the parent company of Genentech (NASDAQ:DNA) and the marketer of Avastin in Europe. The European Regulatory Agency, EMEA, has expressed a favorable opinion. The FDA Approval decision is expected on February 23. If there is any doubt, the AVADO study, to be released by mid-2008, should demonstrate progression-free survival and convince the skeptics. Breast Cancer labeling is worth $ 1 billion in Avastin sales.

Genentech’s stock is trading at below $ 70 a share, assuming the worst scenario. The good news on February 23 as weel as other developments such as  adjuvant treatment of Colon Cancer with Avastin and Lupus and Multiple Sclerosis with Rituxan, should support a ride upwards for DNA.

Biogen Idec rumored to be interested in Genmab… Will GSK move in?

According to The Times of London, the rumor is that Biogen Idec (NASDAQ:BIIB), which tried but failed to sell itself last year at the prompting of the activist shareholder Carl Icahn, may be pondering a bid for Genmab (Copenhagen:GEN.CO), a  $ 4 billion Danish American biotech group witha rich Monoclonal Antibody pipeline . GlaxoSmithKline (NYSE:GSK) has the licence for HuMax, a leukaemia treatment, and committed over $ 2 billion to Genmab last year. We would not be surprised if GSK decided to counterbid to protect its position.

Teva Moves into Biologics

Generic Giant, Israel-based, Teva Pharmaceuticals (NASDAQ:TEVA) buys for $ 400 million in cash, CoGenesys, a 2006 spin off of Maryland-based Human Genome Sciences. CoGenesys’s pipeline of biologic drugs includes treatments for cardiovascular disease, cancer and autoimmune disorders.

Teva announced in 2007 his strategic decision to move into biologics. The obvious opportunity is to build an early leader position in Bio-Similars. Europe has already approved Novartis version of J&J’s Eprex ( marketed in the US by Amgen as Epogen). Teva, which has a market cap in excess of $ 30 billion, has clearly the financial resources to step up its investments in follow on biologics and possibly move into more innovative bio-pharmaceuticals. Copaxone, Teva Multiple Sclerosis drug, may actually benefit from CoGenesys albumin technology inorder to improve and prolong its activity.

How much damage did ENHANCE cause for Merck and Schering Plough’s Vytorin?

After much delays and controversy due to attempts to re-consider the study ENHANCE end point, top line results have been released according to the initial design. Bottom line: Vytorin, a fixed combination of 10 mg of ezetimide, a cholesterol absorption inhibitor, and 80 mg simvastatin did not due better than 80 mg simvastatin alone in reducing Intima Media Thickness (IMT) or atherosclerotic plaque at 3 sites in the carotid arteries in patients with Familial Hypercholesterolemia. Meanwhile, LDL-C, a key marker of heart disease, was down 68% at 24 months in the Vytorin group versus 41% in the simvastatin group. What can we conclude? Atherosclerosis is multi-faceted and particularly difficult to study. Statins anti-inflammatory effect – in addition to LDL-C lowering- may be a significant contributor to their efficacy. Inflammation is a key component of atherosclerosis and heart disease. Vytorin remains a safe and superior efficacy drug to agressively reduce LDL-C.  Dr Steven Nissen, a leading cardiologist from the Cleveland Clinic and often critic of the industry, recommended to limit the use of Vytorin to patients not responding to simvastatin. We believe hat this is an over-reaction since LDL-C remains the best marker of heart disease prevention and  the consensus is that “lower is always better”.

More definitive conclusions will determine the long term future of Vytorin when the results of three larger cardiovascular end pont studies are available in 2010-11.

Merck & Co  (NYSE:MRK) and Schering Plough (NYSE:SGP) have been down 1.3% and 8% respectively on January 14 upon release of the unfavorable news. Negative publicity for Vytorin may have a short term impact on sales but long term Vytorin remains a winner and a major revenue contributor for both Merck and Schering Plough.

Schering Plough’s CEO showed his confidence by personally purchasing $ 2 million of Schering Plough stock on the open market.

ViroPharma Up 20% in the Past Week

ViroPharma (NASDAQ:VPHM) has been up 20% last week to $9.96 a share and a market cap of $ 696 million, after the company announced a guidance for Vancocin of $ 202-208 for 2007 sales and $210-235 for 2008 sales. Nevertheless, the Street continues to assume generic competition for Vancocin if not this year soon after. Cash and equivalent account for $ 6 a share and phase III Cambia for $4-5 a share using a discounted cash flow model. ViroPharma remains attractive as an acquisition target. However, we would  not be surprised if  ViroPharma management leverages its strong cash position and stronger market valuation to acquire products or companies to consolidate its portfolio going forward.

JP Morgan Update: Vertex: Awaiting Telaprevir

At the JP Morgan Healthcare Conference, Joshua Boger, Founder, Chairman and CEO of Vertex (NASDAQ:VRTX) introduces Kurt Graves, formerly Chief Marketing Officer at Novartis AG and now Vertex’s new Executive Vice President, Chief Commercial Officer and Head of Strategic Development.

Kurt’s presentation focused on Vertex’s commercial strategy to build telaprevir, a breaktrough Hepatitis C (HCV) drug, into a blockbuster. Vertex’s vision continues to be on “transformational innovation”: innovation that redifines health and transforms lives with new medications. Hepatitis C remains a market with high medical unmet needs, large potential for growth and treatment provided by specialists. It is particularly appropriate for the new commercial model that Vertex embraces:emphasis on quality of live outcomes and health economics ( rather than just efficacy and safety), patient centric (rather than just physician centric), focus on Impact of Voice (rather than just Share of Voice), growth through market share and market expansion ( rather than just market share), multi-brand treatment solution ( rather single brand).

Telaprevir is progressing toward phase III. The EMEA has provides scientific guidance to JNJ’s Tibotec unit, Vertex commercial partner in Europe. The FDA’s opinion is being expected by the end of January 2008.

While several of its competitors did bite the dust last summer ( see story on biobusiness.tv) , telaprevir appears to have an exceptional product profile: rapid viral decline, strong efficacy (RVR rate 75-80%, SVR> 60%, relapse<10%), and most importantly shorter treatment duration (24 weeks vs. 48 weeks but current standard of care). This is particularly important when 58% of patients cite treatment duration as a reason to drop out.

Recent market research revealed that 98% of physicians intended to prescribe telaprevir within 12 months of availability. Vertex expects the Hepatitis C market to be $ 4 billion by 2010 and exceed $ 10 billion aftter 2012.

Beyond telaprevir, Vertex remains committed to category leadership through the development of second generation protease inhibitors and later of oral drug combinations, adressing the needs of every patient segment.

The promise is clearly there. However investors continue to be cautious with Vertex trading at $22.60, close to its 52 week-low of $ 20.71 and bearly more than 505 of his 52 week high of $ 41.42. Vertex is a strong buy for all those who believe in the telaprevir promise.

JP Morgan Update: ViroPharma back on the Upside

At the JP Morgan Healthcare Conference yesterday, Michel de Rosen, CEO of Viropharma (NASDAQ:VPHM) presented a very attractive update on the company:

1. ViroPharma is advancing his late stage asset, Canvia for the treatment of Cytomegalovirus (CMV) infections, toward a 2009 NDA. CMV infections are the most frequent illness in transplant patients. Other groups at risk include HIV/AIDS patients, certain oncology patients and neonates. Sales expectations for Canvia are in excess of $ 500 million.

2. ViroPharma has a strong Balance Sheet, with $552 million in cash, which supports an agressive Business Development strategy.

3. Vancomicin, which ViroPharma acquired from Eli Lilly in 2004 when sales were $54 million, continue to grow. The company gave guidance of  $ 202-208 million Vancocin net sales for 2007 and $210-235 million for 2008. The new guidelines from the Infectious Disease Society of America (IDSA) support the leadership position of Vancocin in the treatemnt of Clostridium dificile infections (CDI).

Viropharma was up 7.9% yesterday to $9.28 a share. We believe that the company has been unfairly punished by investors in the past year. With a Market Cap of under $650 million, ViroPharma has definitely a very strong upside potential.