Dow components reporting earnings this week (NYSE: DD) (NYSE: MMM) (NYSE: PG) (NYSE: MRK)

DuPont is reporting with expectations of $0.34 per share on revenue of $6.67 billion. The company reports on October 26, 2010.

Procter & Gamble Co. reports on Wednesday. Analysts expect earnings of $1.00 on revenue of $20.25 billion.

3M reports Thursday with expected earnings of $1.51 per share on revenue of $6.83 billion.

Merck, the pharmaceutical bell weather, reports Friday with expected earnings of $0.82 per share and expected revenue of $11.23 billion.

Deals of the Week Has Playoff Fever and Poison Ivy

Deals of the Week! doesn't usually get up on our soapbox and complain unless it's to gripe about undisclosed deal terms, vaguely worded press releases, or an unwillingness to make CVRs tradeable.

But c'mon, pharma, it's time to develop some new products against poison ivy.

This week we saw loads of deals -- alliances, options, out-licensing, deals, deals, and tweaked deals and no-deals. But were any of them around poison ivy treatments? No. A quick search of clinicaltrials.gov for 'poison ivy' or the dreaded 'urushiol' turn up zilch. Our own databases reveal very little poison ivy dealmaking in the past twenty years. Did Project Bioshield or any of its ilk fund research into this scourge? Nope. This makes no sense. If this blogger's back yard is anything to go by, the market will be huge.

Now please excuse us while we scratch the hell out of our legs and go invest another $50 in bandages and feeble lotion at CVS. Oh, and go Phillies!

You're gonna need an ocean of ...

Fate Therapeutics/Becton Dickinson: Fate Therapeutics of San Diego will bring its induced pluripotent stem (iPS) cells to market thanks to a commercial deal it signed with biomedical equipment provider Becton, Dickinson, the firms said Oct. 14. No financial terms were disclosed, but BD will pay Fate an upfront fee, research funding, commercial milestones and royalties on the products BD sells. Fate is one of a handful of biotechs reprogramming adult cells into iPS cells -- an alternative to stem cells derived from human embryos -- with the goal of using iPS cells as lab tools for drug discovery. BD will be responsible for commercial-scale cell production and marketing. In an interview with the IN VIVO Blog, Fate CEO Paul Grayson declined to say specifically when the cells would reach the market. The partners will only sell what Grayson called "plain vanilla" iPS cells, not yet differentiated into various cell types. Fate is working on differentiated cells but for now keeping them for internal use. With the BD deal, Fate becomes the second firm to sell iPS cells. Cellular Dynamics, spun out of the pioneering Wisconsin lab of James Thompson, has been selling iPS-derived cardiomyoctes for nearly a year. -- Soon to be Disappointed SF Giants Fan Alex Lash

Exelixis/BMS: In a turbulent year during which it changed CEOs and laid off staff, Exelixis’ low point might’ve come in June, when key partner Bristol-Myers Squibb Co. walked away from the companies’ agreement to co-develop Phase III cancer-fighting drug XL184. Yet the two are already working together on new programs in diabetes and inflammation: In a series of deals announced October 11, BMS said it would pay $60 million upfront for exclusive development and commercialization rights to a preclinical Exelixis diabetes program that includes the TGR5 agonist XL475, as well as the right to collaborate on a discovery-stage inflammatory disease program centering on RAR-related orphan receptor antagonists. Milestone payments could add $505 million to the deal, plus Exelixis would garner royalties if the programs produce marketable drugs. Simultaneously, BMS and Exelixis said they would unwind some existing oncology agreements; Exelixis opted out of a co-development arrangement on Phase Ib cancer drug XL139 in exchange for a milestone payment, while BMS waived its final option on a 2006 deal covering three targets. The deals bring much-needed cash to the notoriously spendy Exelixis, which despite some recent cost-cutting is now shouldering the high cost of moving XL184 forward by itself.--Paul Bonanos

Merck/Lundbeck: With a large number of atypical antipsychotics competing for attention, any new entrant will have an uphill battle to gain traction, and so Merck has called in the cavalry. The Big Pharma has licensed to CNS-specialist H. Lundbeck exclusive commercialization rights to its recently approved Sycrest (asenapine) for all markets outside of the US, China and Japan. The Danish company paid an undisclosed upfront fee for the rights, and will also make product supply payments to the US company. Asenapine was launched in the US as Saphris by Merck last year, for schizophrenia and for mania associated with bipolar disorder, but has so far disappointed. Making matters trickier in the EU, the schizophrenia indication was turned down in there because regulators were not convinced of the agent's clinical effectiveness. -- John Davis

Lundbeck/Genmab: When you have a product that accounts for around half of your revenue, and that product is nearing patent expiry, you know you have your work cut out for you. Lundbeck, whose antidepressant Cipralex/Lexapro (escitalopram) accounted for 56% of its revenues in the first half, announced last month that it wanted to work with more external partners, and would cull some of its own researchers, as part of a new R&D strategy. The first fruits of this new policy were seen this week, in the Merck deal noted above and in a tie-up with fellow Danish firm Genmab, which will create novel human antibodies to CNS targets identified by Lundbeck. Genmab will receive an upfront payment of €7.5 million and, if the collaboration is successful, it could receive €38 million in milestones, and single-digit royalties as well. Genmab has an option to pursue non-CNS leads that it identifies during the course of the work, and in that case would pay milestones and royalties to Lundbeck. Genmab has been through a torrid time in the past few months, and wants to use its antibody research capabilities as a “profit center, not just a cost center,” according to newly appointed CEO Prof. van de Winkel. -- JD

Pfizer/King: In its first “bolt-on” acquisition since the mega-merger with Wyeth last year, Pfizer has reached an agreement to purchase King Pharmaceuticals for $3.6 billion. The deal, announced Oct. 12, is subject to a tender offer under which Pfizer would buy up outstanding stock in King for $14.25 a share – a 40% premium over the specialty pharma’s closing price on Oct. 11 – but both companies’ boards have agreed to the sale, with closing anticipated in fourth-quarter 2010 or the first quarter of next year. In recent months, Pfizer has outlined a strategy for bolstering its finances prior to the U.S. patent expiration of Lipitor late next year under which it would look for transactions valued at between a few billion to several billion dollars that complement the company's core businesses and add incremental revenues. King will bring to Pfizer a narrow portfolio of highly specialized pain therapies and a well-trained specialty sales force, as well as Remoxy, a tamper-resistant formulation of oxycodone under review at FDA. Pfizer believes King offers commercial synergies: some of King's drugs can be dropped into the Big Pharma's primary care sales force bags, an area where Pfizer is strong and King is not. Pfizer's two key marketed pain products, Lyrica and Celebrex, in turn, can benefit from the support of King's specialized sales force; currently Pfizer's detailing emphasis for them is on primary care doctors. –Joseph Haas and Wendy Diller

UCB/Synosia: An accomplished in-licensor of pharma's unwanted assets, Synosia Therapeutics has finally found itself on the other side of a deal: On Oct. 12 the biotech said it out-licensed its two lead Parkinson's disease candidates, SYN-115 and SYN-118, to Belgian CNS specialist UCB, which will conduct Phase III clinical trials and commercialize them. The companies will also set up a broader alliance, under which compounds from either group will be evaluated by Synosia through to the end of Phase II, at which point UCB will conduct further development and commercialization. In return for rights to the two Parkinson's disease products, UCB will make an undisclosed upfront payment and pay regulatory and commercial milestones, which could give rise to an additional $725 million in funding for Synosia. UCB has also led a $30 million series C funding in Synosia with an equity investment of $20 million. The other $10 million came from existing investors, which include Versant Ventures, 5AM Ventures, Novo A/S, Aravis Venture, Investor Growth Capital and Swiss Helvetia Fund. The deal goes some way toward validating Synosia's in-licensing strategy: '115 and '118 came from Roche and Syngenta, respectively. -- JD

Novartis/Immunogen: Last week we at IVB rhetorically asked one another: where are all the deals in antibody-drug conjugation technology, an exiting area seemingly bereft of deals lately. Well well. Just like that, antibody-drug conjugate developer ImmunoGen licensed its platform technology to Novartis for $45 million upfront to create enhanced cancer-fighting antibodies against unspecified targets of Novartis's choosing. ImmunoGen would get up to $200.5 million in milestones for each target that leads to a conjugate, plus royalties on sales if the drugs reach the market. Announcing the deal Oct. 11, the companies declined to say how many targets Novartis has rights for, but ImmunoGen retains ownership of the cytotoxic small molecules and chemical linkers plus other know-how that it contributes to each therapeutic. The Novartis deal comes just as ImmunoGen and Roche released promising interim Phase II data for T-DM1 in first-line treatment of HER2-positive metastatic breast cancer. That compound, a combination of ImmunoGen's small molecule maytansinoid DM1 and Roche/Genentech antibody Herceptin (trastuzumab), is currently industry's most advanced ADC candidate. --S.t.b.D.S.F.G.F.A.L.

Mingsight/Pfizer: Big pharmas are in the throes of revamping their R&D pipelines and that means deprioritizing certain assets. But does that mean outlicensing? Maaaybe. An analysis in the soon-to-be-published October IN VIVO shows that outlicensing volume has declined dramatically since 2007, when a total of 54 programs from big pharma, big biotech, and specialty players were offloaded to new partners. This year through August 31, there have been only 10 such deals. But for the VCs and biotech execs looking to jump-start a newco with already validated molecules, this week’s alliance between Pfizer and MingSight proves that outlicensing in the biopharma wilderness, truly a rare bird, does still exist. MingSight, a still stealthy biotech with bases of operation in both China and San Diego, has acquired exclusive worldwide rights to two preclinical compounds from Pfizer that are being developed as treatments for diabetic retinopathy, and potentially uveitis and dry eye. Under the terms of the agreement (which really weren’t disclosed in any substantive way), MingSight has agreed to pay Pfizer an upfront fee, paid in the form of cash and a convertible note, as well as development and sales related milestone payments, and royalties on future sales. MingSight’s dual citizenship is noteworthy; this kind of hybrid approach, with its emphasis on keeping R&D burn low by moving the work to the still lower-cost China, is becoming an increasingly attractive model in the start-up arena, where the mantra of the day is capital efficiency. In-licensing has been the model du jour for founding ophthalmology companies for much of the past decade, as companies look to repurpose drugs that have already been vetted in preclinical or clinical studies in non-ophthalmic indications for use in the eye.—Ellen Foster Licking

Ablynx/Merck-Serono: Ablynx has proven to be the master of Merck-Serono's domain (antibodies) as the two companies are doubling down on their collaboration in the space. On Monday Ablynx announced it would receive €10 million up-front to develop its proprietary Nanobody domain antibodies against a M-S nominated inflammatory disease target. Ablynx will hand off the package to M-S at the IND stage, handling all discovery and preclinical activities (and covering costs, excluding manufacturing costs) on its own. When (if?) Merck-Serono takes over Ablynx will receive a €15 million milestone and can opt-in to a 50/50 co-development deal on the project -- if not, Merck gets worldwide rights and Ablynx will receive milestones and royalties down the road. The companies have been working together since September 2008, on two targets in oncology and immunology. -- CM

image by flickr user cygnus921 used under a creative commons license

Merck Puts Up Its Asset-Sale Shingle

Big Pharma has been slow to adopt out-licensing strategies for a plethora of reasons: fear it will regret giving up something that could turn out to be a hit, the perception that out-licensed compounds are tainted, and an ingrained mentality that it could afford to develop everything worthwhile on its own.

Merck is the latest company to change its tune in the face of a resource-constrained reality however; Lilly, Pfizer and others started earlier, by far, as IN VIVO has long tracked. At Elsevier's Pharmaceutical Strategic Outlook conference Thursday morning in NY, David Nicholson, the company's new SVP and head of Worldwide Licensing and Knowledge Management, gave the largely biotech and Big Pharma audience a message loud and clear: Merck's new out-licensing department is open for business-or will be shortly. "We have set up an out-licensing group, headed by Meeta Chatterjee," and are now looking at "what we want to out-license" and "how," he said in a talk with Elsevier's Roger Longman.

"In the past, Merck didn't out-license because out-licensing was traditionally used to jettison "rubbish," but that is not the case anymore," noted Nicholson, who previously headed worldwide licensing at Schering-Plough. The company has some very attractive assets, but there is "no way Merck can afford to develop everything" in its R&D program. "Our R&D model is to generate a lot of output—more than we can deal with. So we have to make some tough choices and it poses the question: What do we do with these other assets?" And who might be potential in-licensors? Take note: Merck's not only interested in talking to biotechs and small pharma—its Big Pharma competitors could take a look too.

Details have yet to be worked out – Merck's looking at the best business models and deal structures for outlicensing and "brainstorming" ideas. And the company is generating a list of out-licensing assets.

Meanwhile, its in-licensing program is also moving forward. Now that its merger with Schering is completed, it's finalizing a list of its revamped pipeline, which it will announce in the next few weeks, and shortly after that it will "be able to talk to the world," Nicholson said.

Nicholson also spoke –albeit generally-- about Merck's partnership strategy going forward, i.e. biotechs will remain an incredibly important to Merck, because "the vast majority of new science is done outside Merck's walls," he said. "There are more opportunities outside than inside," and Merck wants to partner with all kinds of technologies, companies, and at all stages of development."


That includes externalizing discovery- a hot topic within Big Pharma at the moment, especially in light of a recent Morgan Stanley report, which argued that Big Pharma isn't doing worthwhile research and should evolve its "R&D" model to an "S&D" or search and develop model. Nicholson quarreled with the report's conclusions, but noted it did raise "interesting questions" about how much discovery research pharma should be doing internally versus externally.

Nicholson's message –a willingness to work with new kinds of partners in new ways--wasn't new for Merck – but it honed in on a trend that's been ongoing in Big Pharma for several years now, and practiced with more urgency as patent cliffs loom: In a growth constrained reality, companies need to evaluate what they can and can't afford to do internally and work with partners in new ways as they become more cost efficient and upgrade pipelines.

--Wendy Diller

Merck/AZ Cancer Deal: Will Intra-Big Pharma Development Deals Move Beyond the Serendipitous?

Is that a mek inhibitor, sir?

Merck and AstraZeneca are expected to announce today that they're teaming up to test a combination of two early-stage oncology candidates. The companies are billing the deal as a first-of-its-kind collaboration--and fair enough: we can't think of another time two large companies have done this kind of deal with two molecules so far from the market.

The Big Pharmas will test Merck's MK-2206 and AZ's AZD6244 (a.k.a. ARRY-886, the compound was acquired from Array Biopharma in 2003) in a Phase I safety and tolerability trial. Costs will be split evenly, the program will be steered by a joint committee, and Merck is the sponsor of the trial.

The reason so few Big Pharma-Big Pharma development deals get done is that they're very tricky; control, valuation, overlap with other, non-partnered projects--these and other things present high hurdles for two large companies to come together in even basic ways. Of course there are plenty of reasons to take a stab at such deals--several of which are outlined in this February IN VIVO piece from Bain & Co. But if these alliances aren't discouraged institutionally, they're certainly not highly sought after either. In fact this deal came about not through any lets-be-friends business development outreach program at Merck or AZ, but by chance encounter.

"This was driven by two scientists meeting at an airport security checkpoint," Merck chief strategy officer and SVP worldwide licensing and external research Merv Turner told The IN VIVO Blog.

One scientist from Merck, one from AZ, they got chatting, and presumably between removing their laptops from their cases and putting their shoes back on, the special and awkward intimacy that comes from publicly surrendering all liquids and being patted down by a stranger wearing latex gloves worked its magic. WSJ's Ron Winslow has more color on the actual conversation, which apparently included that old chestnut "Are you the mek guy?"

"Of course through competitive intelligence they had some information about what each company was up to ... and they said to one another, there’s a compelling rationale for getting these molecules together," lets get the business development groups on the case, says Turner.

That airport rendezvous was in Dublin in November 2007. That it took more than 18 months to ink a deal to conduct a combination Phase I program says as much about the complexities of oncology drug development as it does the difficulties of intra-Big Pharma dealmaking.

Merck's MK-2206 is, according to Merck and AZ, the most advanced AKT inhibitor in development. AKT acts just downstream of PI3k in that important cancer cell survival pathway (the one generating all those deals lately); Phase I data on the drug were presented at this weekend's ASCO meeting. AZ's '6244 hits mitogen-activated protein kinase 1 (mek), an actor in an important parallel signaling pathway. Like the Merck compound, '6244 is further along than its competitors; the candidate has completed several Phase II monotherapy studies and its Phase II program continues apace.

A greater understanding of cancer biology, says Turner, should drive more deals like this one, where "the potential to short circuit what could otherwise be a long and combinatorial approach to finding the right pairs" of oncology therapies "becomes quite compelling."

There are over 800 molecules in development for various cancers. "We're learning more and more about the nature of tumorogenicity and the pathways involved and therefore how to select targets and populations expressing those targets ... and as we go forward into the new mechanism-driven approaches to tumor biology the rationale for combining agents which target complementary pathways becomes more clear," explains Turner.

Of course Merck is developing its own mek inhibitor and AZ its own AKT inhibitor, there are multiple targets in each pathway, and such compounds could be useful in a variety of cancers where the companies have individual ongoing programs, all which could complicate a more extensive deal.

"When we set out on this, to try to think through all the possibilities, we soon realized that the number of branches that arise if you try to construct a decision tree of all the things that might happen in development, it just becomes overwhelming," says Turner. So the companies are starting slowly, taking a step-wise approach to collaboration that need not go beyond this Phase I program.

We decided, "let's start with the easy part, work out how we'll do these experiments together in patients in Phase I, and if that succeeds, we'll go on to the next part," he says.

If the eventual goal is some sort of fixed-dose combination the companies will eventually have to jump in with two feet, perhaps partnering on multiple compounds or even entire pathways. But that need not happen at all. "The first goal could be to have each party arrive at the marketplace [independently], with a label statement that supports use of the other agent in combination," says Turner.

A small step, but a step forward, and the kind of thing that if repeated often enough could have some meaningful impact on drug development costs and speed to market, eventually advancing the standard of care in difficult diseases.

We presume this means taking another step, beyond chance encounters in airports or the DMV or even Starbucks. "If this works as advertised," sums up Turner, "we can think of it as a template for future similar deals."

Notes from BIO: Merck's Take on Biomarker-Based Drug Development

Merck sees itself as a leader in biomarker-based drug development. "We are toward the extreme end" of peer companies in the field, Executive Director of Licensing & External Research Reid Leonard said during a BIO breakout session May 19.

"We actually have very aggressive internal goals for the requirements for a biomarker strategy that is coincidentally built up with the drug discovery strategy for any new target."

But before you put Merck down as an advocate of personalized medicine, listen to how he described the company's approach:

"Ultimately our goal, despite the overall objective of being able to stratify patients where its appropriate and necessary, given the choice, if we are going to find a therapy that will treat a disease that many people will have, our preference is to find a way of doing that that in fact doesn't require stratification, that in fact picks a target that is intrinsically less sensitive to genetic variation than another target. So its using all the same data to try to essentially come up with a drug that in fact the physician can have some confidence will work in 80% of the people."

It's not that Merck will ignore stratification if it appears appropriate in clinical trials. That's just not the goal.

Notes From BIO: Josh Boger Goes Back to Merck

Okay, no, this isn't a news flash. We don't have a scoop on what Vertex' outgoing CEO Josh Boger plans to do once he officially leaves the company he founded at the end of this week. And we certainly aren't predicting that he will return to Merck, where he began his career in pharmaceutical R&D before leaving to found Vertex in 1989.

But we do know what Boger did when it was time to step down as chairman of the Biotechnology Industry Organization: he returned to the legendary vision statement offered by George Merck in 1950, which served as the touchstone for Merck's vision of leadership for the rest of the 20th Century.

George Merck's famous advice--usually paraphrased as "putting patients first"--is not just a slogan, Boger observed, but a business plan, complete with the assertion that the "better" industry remembers that medicine is "for the people...not for the profits," the better the profit ultimately is.

It is also a mission statement for the future: "We cannot rest until the way has been found to bring our finest achievements to everyone."

DotW: It's A Mad Mad Mad Mad World

These days it seems like we could all use a dose of Stanley Kramer's 1963 classic movie about a madcap chase through the California desert in search of treasure. (What else is there?) Thankfully we have the NCAA tourney--that professional event masquerading as amateur ball--to distract us from the doom, gloom, and outrage swirling in the air.

Who's not feeling the love? Mad Money's Cramer, who is still reeling from the smackdown Jon Stewart gave him last week. Anyone associated with AIG, which has earned a new acronym in the eyes of many Americans: Arrogance, Ignorance, and Greed. Also, Connecticut Senator Christopher Dodd, given the responsibility he bears for the bail-out legislation that led to outsized AIG bonuses in the first place.

Our level-headed legislators are trying to tamp down the furor related to AIG bonuses by taxing the hell out of them. (The move ought to make VCs feel better; by comparsion the new 39% tax rate on carried interest is quite modest.)

There's no shortage of madness in our own industry. The war of words between BVF and Avigen, continues to escalate. (Remember when Carl Icahn was the only activist shareholder to whom we paid attention?) On Friday, BVF sent a letter to Avigen shareholders promising to pay $1.20-a-share for the company, but only if BVF earns seats on the company's board. BVF, of course, owns a significant share in Avigen. Outraged by the way the biotech has been managed, they are hoping to oust leadership to broker a sale to MediciNova.

Of course, the BVF/Avigen saga is small potatoes compared to the umbrage directed at Harvard professor Dr. Joseph Biederman, whose involvement in a conflict-of-interest scandal related to the use of antipsychotics became headline news once again. So much for the purity of the ivory tower.

Will Pfizer investors rise up in anger at the news the big drugmaker is on the prowl for a generics biz? What about Astellas' investors? Unwilling to be drawn into a bidding war for CV Therapeutics after Gilead trumped its offer, Astellas called off its hostile bid for the company this week. But with billions in cash in its war chest and top-seller FloMax due to go off patent in October, the number 2 Japanese pharma needs to do a deal and odds are investor clamoring to that effect will rise in the coming months.

Are you outraged about the incessant debate about Michelle Obama's right to bare arms? Stop the madness. It's time for...

Merck Serono/Fast Forward: Merck Serono this week showed its willingness to accelerate early stage research in MS by providing up to $19 million in a partnership with Fast Forward, a subsidiary of the National Multiple Sclerosis Society. The agreement—which has a two-year term, but may extend for an additional three—is focused on identifying the most promising drug discovery research in this field, whether in biotech or academia, and providing the funds to take those projects through development. The money might all be coming from Merck Serono, but it’s Fast Forward—set up 18 months ago to provide a bridge, both informational and financial, between academia and the private sector—that will take the lead in selecting awardees for the funds (albeit with participation from the drug firm). Priority areas for development, however, will be determined by a joint committee with representatives from both sides. And yes, there are strings attached: Merck Serono, with (of course) a strong interest in building out its MS franchise beyond Rebif, gets first right of refusal to pursue development of projects that it supports. Fast Forward is keen to point out that these rights don’t extend to the many other projects it’s funding independently of this agreement, however. And if Merck Serono isn’t interested in pursuing a program, Fast Forward is free to find another partner. For Merck Serono, this smells a bit like disease-focused corporate VC—albeit with a significant partner making portfolio decisions. And although many other disease-focused charities besides the National MS Society are supporting and financing research in academia and, increasingly, in the private sector too, few have signed up large drug firms. Not that this means other pharma aren’t interested in supporting early-stage research, of course: GlaxoSmithKline has a drug performance unit (DPU) dedicated to academic collaborations.—Melanie Senior

Merck/MMV: Merck Serono wasn’t the only pharma to announce a tie-up with a not-for-profit this week. Merck & Co. Inc. also made headlines, announcing a deal with the Medicines for Malaria Venture (MMV) around a novel, orally available, IND-ready antimalarial. Under the terms of the agreement Merck, whose researchers discovered the candidate, has granted MMV an exclusive royalty-free license to pursue development of the malaria drug in countries where the disease is endemic. In return, Merck retains the option to become MMV’s development partner upon completion of the first Phase II study of the candidate. But if it exercises that option, Merck has also promised that it will price the drug such that it is “not ultimately profiting from its use in developing countries,” according to the press release announcing the news. Merck scientists have already shown in preclinical studies that the IND-ready drug is effective against P. falciparum, the organism that causes acute malaria, including multi-drug resistant strains. MMV will take-over further testing, launching first in human safety trials later this year. The deal is a good one for Merck on a number of levels. It bolsters the pharma’s public image, showing its intent to play a role in developing treatments for diseases that have long been neglected, a move echoed by GlaxoSmithKline and Novartis. It also offloads some development costs near-term, while retaining a clawback to the product should it ultimately work as advertised. More importantly, from the biz dev perspective, it may give Merck access to a priority review voucher in the future. The PRV program, first proposed by a group of Duke economics professors as a potential approach to incentivize R&D for global public health priorities, was included in the FDA Amendments Act with only minor refinement in 2007. Merck, like Pfizer and Sanofi-Aventis, has signaled its interest in the program, by offering comments on FDA’s draft guidance for the incentive program.—Ellen Foster Licking

Centocor/U. Michigan: Even as debate rages in the public sector about the academia’s ties to industry, Big Pharmas’ efforts to get closer to thought leaders at universities is likely to muddy the discussion. In addition to GlaxoSmithKline and AstraZeneca, Johnson & Johnson has been at the forefront of embracing a new model of innovation that improves information flow between the tree-lined walks of academic institutions and the halls of pharma. In January, J&J’s Belgium affiliate Janssen Pharmaceutica NV teamed up with Vanderbilt University's Program in Drug Discovery to discover and license metabotropic glutamate receptors for the potential development of a new class of schizophrenia drugs. That collaboration, which promises to move J&J’s schizophrenia therapy in a new direction, fits in with the pharmaceutical company's new mantra of "open innovation," a term Paul Stoffels, MD, J&J's chairman of global R&D, Pharmaceuticals, first used in media interviews at the beginning of the year. On March 19, J&J announced another deal, this time between Centocor and the University of Michigan, designed to further its ability to access innovation on the cheap. In an interesting twist, the Centocor/U. Michigan tie-up doesn’t relate to the product pipeline as much as the war for talent. The new program pairs minority post-doctoral fellows recruited by the University of Michigan with Centocor researchers to work jointly on interesting research. Under the program, research proposals will be developed by U Mich and Centocor scientists and then submitted for review by a combined steering committee that will select certain grants and follow their progress. One important mission of the program will be fostering strong relationships with African Americans, Hispanic, and Native American scientists who are working in the strategic areas of focus for Centocor. “This strategic link will help us build strong relationships with these talented individuals thus creating a robust pipeline of potential hires,” said Miguel Barbosa, PhD, VP of Discovery Research at Centocor. It’s the latest attempt to do well financially by doing good, but it’s unquestionably a smart PR move on Centocor’s part. It requires very little financial input, breathes new life into the organization, and may yield interesting products down the road.—Ellen Foster Licking

Inverness/Acon Labs: Point-of-care diagnostics specialist Inverness has scooped up the remaining portion of ACON Labs’ lateral flow immunoassay test kit business for the consumer, point-of-care, and laboratory markets, including tests in infectious disease, cardiology, drugs of abuse, and women’s health. The price of the deal? A mere $200 million. ACON will retain its other worldwide in vitro diagnostics businesses including diabetes testing, clinical chemistry and other immunoassay products. Inverness expects to complete the transaction in a series of cash payments through October 2011, but holds the option to use stock for up to 34% of the purchase price. Three years ago, following a patent dispute in which Inverness alleged ACON infringed several of its immunoassay patents including IP around consumer pregnancy and ovulation tests, it acquired ACON’s rapid diagnostics businesses covering the US, Canada, most of Europe, and parts of the Pacific Rim for $175 million. At the time, Inverness agreed to buy the remainder of ACON’s ROW territories including China, India, Russia, Latin and South America, the Middle East, Africa, and Eastern Europe. That “second territory” business – the subject of this deal -- accounted for $45 million in revenues last year. The deal returns Inverness to its “bread and butter: broadening geographic reach and leveraging sales and manufacturing infrastructure,” according to Leerink Swann analyst Bruce Cranna. Inverness has been on a more expansionist buying spree in the past several years, acquiring Biosite and Cholestech in 2007 (see our coverage in IN VIVO here),then shelling out over a billion dollars to buy Matria Healthcare and establish a health management division alongside its diagnostics business.--Mark Ratner

GTC-Biotherapeutics/LEO Pharma: Our, uh, “goat” this week is a deal that has for months apparently been in slow transition, but last Friday took a nasty turn (OK, yes, so it’s a No Deal of Last Week). LEO Pharma has since 2005 held rights to develop and market GTC-Biotherapeutics’ recombinant human antithrombin Atryn in Europe, Canada and the Middle East, but it just doesn’t want those rights anymore. So last year the two companies said that LEO wanted to transition Atryn to a different marketing partner, and GTC has been seeking to do so (Atryn, which is made in the milk of transgenic goats, was approved in Europe in 2006, and was also recently approved in the US as well, where it will be sold by Ovation). Now comes word that “GTC considers LEO to be in breach of its obligations under the contract and is terminating the contract pursuant to its terms and seeking damages under International Chamber of Commerce arbitration procedures.” Terminating the LEO deal should allow GTC to speed discussions with new potential partners, broaden the drug’s label in existing markets and get it approved in other markets, like Canada. One potential partner: LFB Biotechnologies, the French plasma-drugs specialist that loaned GTC $15 million last December and with whom GTC has an existing deal in recombinant proteins and mAbs development. Meanwhile GTC, despite its recent regulatory success in the US—which the company believes is a significant validation of its transgenic technology—has other troubles. This week the biotech received a warning letter from Nasdaq related to the minimum market-value threshold.—Chris Morrison

Image courtesy of flickr user oceanaris through a creative commons license.

DotW: The Future of Primary Care?

If you haven't seen this video from the funny people at The Onion, you must check it out. Could Despondex, a drug designed to treat the irrationally exuberant, be a future blockbuster in the drastically reordered world of primary care?



This week's unprecedented deal activity--Merck's $41.1 billion buy-out of Schering, Gilead's white knight bid for CV Therapeutics, and Roche's rapprochement with Genentech--admittedly leaves this IN VIVO Blogger reeling--and more than a little tired.

But the Merck/Schering deal echoes many of the themes raised by Pfizer's bid for Wyeth: a desire for diversification beyond traditional pharmaceuticals; the need for late stage products that brigde the revenue gap associated patent expirations; and the belief that bigger is better in an age where reimbursement is a challenge and regulatory uncertainty is as least as great as R&D risk. Merck had already taken steps to push a new commercial model. The acquisition of Schering will likely only accelerate the shift though it's hard to know now what the final strucutre of the newly merged organization will look like.

In the meantime, it's hard not to wonder at the potential market size of a drug like Despondex. We guarantee the negative economic news of late means its much smaller than it might have been six months ago. And it's not like there aren't natural remedies for the disorder. Just mention the words "financial runway" to any small biotech exec or "down round" to venture capitalists.

Some other people who aren't good candidates for the drug include Xoma, Cadence, Synta, and Neose employees. Xoma received news this week that it's listing on the NASDAQ is at risk because of steep declines in the company's share price. Cadence, which diluted the hell out of itself with an $86.6 million private placement last month, announced Thursday that is was shelving work on Omigard, its late stage gel for catheter-related infections. Synta, meanwhile, revealed it was laying off 40% of its staffers in the wake of the high profile failure of its melanoma drug elesclomol. And it's the end of the line for troubled Neose, which is auctioning off the last of its worldy goods (preview date March 24). And what about members of "Friends of an Independent Genentech" (we call them FIGs) or sales and marketing reps for Big Pharma? (Have you heard about the layoffs?)

But there are a few people who might benefit from the drug. It stands to reason Jeff Kindler, CEO of Pfizer, might need a short course thanks to his 2008 compensation package. We emphasize "short" since he's probably not over the moon--his pay did drop 5% to a mere $13.1 million last year. And then there's Fred Hassan, who helped orchestrate Merck's take-out of Schering-Plough--just don't call it a change of control. As IVB reported earlier this week, Hassan stands to receive at least $37 million for brokering the deal with Merck, but his pay could jumpt to$60 million if powers that be believe change of control applies to ownership structure but not occupancy of the corner office. (IVB calls that having your cake and eating it too.)

So what if the drug only works for these two men? Hey, maybe that really is the future of primary care! And here's a solution to the marketing dilemma: just call it personalized medicine and charge a fortune for the drug. Does an overpaid, middle-aged white male suffering from excessive happiness count as an orphan indication? (Check out future twitter feeds from Mike, Ellen, Ramsey, and Chris to find out.)




Merck/Schering-Plough: It was hard to pick top honors for biggest deal of the week, but we are going with the Merck/Schering-Plough tie-up since Roche/Genentech (see below) has felt like a foregone conclusion for at least a week (sorry FIGs). We confess Merck's unexpected bid for its cardiovascular partner Schering had folks at IVB at a loss--we even told you last week we didn't think this deal was coming given the historic importance Merck has placed on R&D and organic growth. But Merck, much like Pfizer in its bid for Wyeth, is looking to the mega-acquisition to stem lost profits from its top-selling drug Singulair which loses patent protection in 2012. It also desperately needs to refill its pipeline following some high profile development setbacks. But if the cost-savings from the acquisition will elevate Merck's earnings growing as key drugs lose patent protection, it's less clear whether Schering will help or hinder the company's efforts to compete in a changing healthcare environment, increasingly focused on productivity, agility and specialized, targeted medicines. "The strength of the combination of Merck and Schering-Plough's pipeline, the complementary product portfolio with long periods of exclusivity, the strong commercial models, the expanded global presence, the sustainable cost savings for long-term growth go far beyond just one or two products," CEO Richard Clark said during a same-day conference call. A big positive of Schering's portfolio is that it is less vulnerable to generic competition than many other large pharmas; it's not expected to hit a patent cliff until 2014 and beyond, providing more time to bring pipeline drugs to market. Schering's marketed portfolio includes the tumor necrosis factor inhibitor Remicade, the allergy medication Nasonex, the brain tumor treatment Temodar, and the hepatitis C drug Pegintron. Schering is also relatively more diversified than Merck, bringing a larger biologicals business and substantial operations in animal health and over-the-counter drugs. Combined, Merck and Schering-Plough will have sales of nearly $47 billion based on 2008 sales. No one product, Clark said, will account for more than 10 percent of the combined company's sales. Just getting the deal done required some pretty fancy legal maneuvering, as Merck and Schering found creative ways to do an end run around a change of control clause related to Schering's partnership with J&J for Remicade. The complicated arrangement, dubbed“Project Solar” in SEC documents that reference Merck as “Mercury” and Schering as “Saturn,” involves structuring the deal as a reverse merger in which Schering remains the surviving company. Don't forget, however, that the lasting entity will be called Merck, headed by Merck CEO Richard Clark, and that Schering shareholders will own only a 31 percent stake.

Roche/Genentech: It's official. $95 is the magic number. (We thought it was 3.) Nearly 8 months after Roche launched its initial bid for Genentech, it has succeeded in obtaining the blessing of the biotech's Special Committee. The nearly $47 billion marriage, which assumes enough minority shareholders will tender their stock, may be off to a rocky start if Franz Humer and company can't convince high flying Genentech employees such as CEO Arthur Levinson, president of product development Susan Desmond-Hellman, and EVP for research and CSO Richard Scheller to remain with the company. Roche's patient wooing took a more urgent tone last Friday, when the Swiss pharma upped it's hostile tender offer from $86.50 to $93 a share. The gambit was enough to lure Genentech's special committee back to the bargaining table to address widely divergent opinions on the biotech's value. (Recall last fall $112 was the target price Genentech was vying to obtain.) The subsequent maneuvering hinged on debate over two key points - Roche argued Genentech's value was plunging due to worsening financial markets. Meanwhile, anticipation has continued to grow ahead of the results of the eagerly awaited clinical trial that could greatly expand the market for cancer treatment Avastin. Tellingly, SEC documents released on Thursday show that the Special Committee was increasingly worried about the current economic crisis. Not only has there been a "significant deterioration in financial markets," but the Obama administration's emphasis on reducing health care costs has added uncertainty to the outlook for pricing medications, according to documents Genentech filed with the SEC. In hopes of finalizing the deal, the two companies eliminated a provision in their long-standing affiliation agreement that allowed shareholders to receive a higher price than the tender offer during a so-called squeeze-out. That clause has long been a sticking point for Roche, providing shareholders with little incentive to tender at what might ultimately be a lower price. Moreover, the special committee noted in SEC filings that with this sweetened offer, "the company's stockholders will avoid the risks associated with a negative outcome in the Avastin trial, including potential declines in the trading prices of the shares, a determination by Roche not to purchase any shares, or should Roche determine to purchase any shares that it would do so at a reduced price."

Gilead/CV Therapeutics: What does it say about the week's deal flow that a $1.4 billion dollar white knight bid is third on the deals of the week hit parade? Not to be outdone by the likes of Big Pharma and its Big Biotech cousin, Gilead made news with its $20-per-share offer for CV Therapeutics, which has been fighting off a hostile $16-a-share bid from Astellas. With $3.24 billion in cash and equivalents on hand at the end of 2008, Gilead has the resources--and apparently the moxie--to do the deal. While its focus has traditionally been on antivirals - it markets the HIV therapies Atripla and Truvada - it has also built a budding cardiovascular franchise centered around its pulmonary arterial hypertension drug Letairis and a Phase III drug for resistant hypertension called daruesentan. There's a strategic fit argument, therefore, when it comes to Gilead's buying CVT: the Palo Alto-based biotech provides the company with some additional diversification in a bulked up cardiology franchise--CVT already markets Ranexa and Lexiscan--as well as a ready-made sales force to market the products. "Gilead is essentially buying a sales force for darusentan via Ranexa, but they only get 10 percent of Lexiscan," noted Leerink Swann analyst Joseph Schwartz in an interview with "The Pink Sheet" DAILY. That's because in the U.S., Lexiscan is already partnered with Astellas, with CVT receiving a 10% royalty on sales. Although some analysts have called the price Gilead is paying for CVT excessive, questions about the true ownership of Lexiscan may have nudged Gilead into shelling out the extra $4-a-share. That's because the original 2000 deal between Astellas predecessor Fujisawa and CVT included a "standstill" agreement voiding the deal if Fujisawa or an affiliate tried to buy stock in CVT beyond that specified in the deal. And what happened on Feb. 27? Astellas turned up the heat on CVT, turning its spurned offer into a tender to CVT shareholders, while also filing a lawsuit in Delaware Chancery Court seeking to overturn both the "standstill" and a poison pill that CVT's board extended for one year just before it was set to expire this February. It remains unclear whether Astellas' actions have placed it in breach of the 2000 contract, which could mean full rights to Lexiscan return to CVT. If they do, outright ownership of Lexiscan will certainly boost Gilead's bottom line.



MedImmune/Micromet: Perhaps it isn’t fair to lump this evolving situation into the ‘No-deal’ of the week category, but Micromet’s co-development deal with MedImmune for its lead bi-specific T-cell engaging antibody blinatumomab has definitely been downsized. And, as CEO Christian Itin repeated several times on a conference call that doubled as an explanation of the new arrangement with MedImmune and Micromet’s 2008 results, that isn’t necessarily a bad thing. MedImmune opted out of its US development role for blinatumomab (a.k.a. MT103), a BiTE antibody in development for hematological cancers, but it hasn’t washed its hands of the project entirely. MedImmune will complete development of a commercial scale manufacturing process for the candidate on its own dime. It will also retain an option to regain commercial rights to blinatumomab upon first US approval, at pre-defined but undisclosed terms. And the two companies announced they were pursuing—from scratch—a new BiTE program in hematological cancers as well (the geographic split—MedImmune gets North American rights and Micromet RoW—is the same). To date MedImmune has not put blinatumomab into the clinic in the US, though an IND was approved in early 2007. Micromet has taken blinatumomab into the clinic in Europe, where in Germany the candidate is in a Phase II study in adult patients with acute lymphoblastic leukemia (ALL) and a Phase I study in relapsed non-Hodgkins Lymphoma (NHL). Interim data for both trials will be presented in June at the European Hematology Association meeting in Berlin, according to Itin. So why did MedImmune opt out? Itin declined to speculate beyond suggesting that the companies’ focus so far on rare malignancies might not be a broad enough opportunity for MedImmune parent, AstraZeneca. It’s “not too unusual that the path isn’t at the center of focus for a large pharma company,” he said. Furthermore there have been no disappointing data out of any trial, Itin said, and “the trial is recruiting at higher speed than we predicted.” Micromet now has global rights to develop the drug, at a cost made more palatable by MedImmune’s commitment to funding both manufacturing process development. Blinatumomab isn’t the first MedImmune project that AZ has given back to a partner on pretty good terms. Late last year the Big Pharma handed back to Infinity Pharmaceuticals IPI-504 an Hsp90 inhibitor in Phase III, as well as an oral back up in Phase I. The difference for Micromet is that it cannot turn around and partner US rights or global rights to blinatumomab so long as MedImmune/AZ’s option remains outstanding--Chris Morrison.

The IN VIVO Blog Podcast: Lets Make a Deal!

You'll never guess what our intrepid podcasters are talking about this week. Give up? OK we'll spill the beans: the Merck/Schering-Plough deal! We kid you not. Buckle your seatbelt and click on the logo below, and you're away.

Don't forget, you can access the podcast via iTunes also.

Imagining Lunch With Dick Clark

INT. MERCK CAFETERIA, WHITEHOUSE STATION, N.J.

12:30PM. Merck CEO DICK CLARK enters, selects a few assorted items for lunch, and approaches the counter, where he is greeted by the CLERK.

Merck Cafeteria Clerk: Oh, uh, hi Mr. Clark. OK let’s see, diet coke, turkey sandwich, kettle chips, ooh those are good. Have you tried the angry chili flavor? That’ll be $12.35, sir.

Dick Clark: Just hold on a second there [sends blackberry message to general counsel] ... Hi. No i prefer the unsalted. Better for the ticker. Anyway ... [checks blackberry] ... OK, see, I’d like to structure this transaction so that my lunch buys me.

Clerk: What? Ha, that’s funny. Are you going to pay cash?

Dick Clark: Well yes [gets wallet] ... but I'm going to put some of it on this card. But we need to have the sandwich buy me, seriously. If the lunch buys me I don’t have to share it with Kellogg. I kind of promised Pete half my turkey and swiss, but if it’s not my sandwich, technically I don’t have to give him any. And it’s the last one in the fridge over there. Plus … lets see [checks blackberry] … yes. If we do it this way the calories don’t count either.

Clerk: Uh, I don’t know how to do that. There’s no button for that on the register.

Dick Clark: Just ring it up as you normally would, and I’ll get Bruce Kuhlik down here in a minute to draw up the agreement and rename the sandwich. Oh and I might as well pre-pay for—I mean tomorrow’s sandwich might as well pre-pay for me, right now. That way there’s no confusion. Today's lunch and tomorrow's lunch, all together.

Clerk: I’m sorry, Mr Clark, I still don’t know how we’re going to do this.

Dick Clark: [doesn't answer]

Clerk: Sir?

Dick Clark: Sorry, were you talking to me or the lunch?

Clerk: [sighs] I'm not even supposed to be here today.

Merck/SGP: Change of Control and Executive Pay Collide

There are several reasons Schering-Plough chief executive Fred Hassan sounded upbeat on the conference call this morning to discuss the $41 billion deal he worked out with Merck. One possibility is that Fred, 63, may walk away with nearly $60 million in the event of a change of control, according to the proxy statement filed last spring, which is the most recent available.

Granted, this could change a bit, because the payout is calculated, in part, by using the Dec. 31, 2007, closing stock price of $26.64. And who knows? Maybe Merck will try to argue the change of control provision doesn't apply, since the deal is structured as a reverse merger. On a conference call, Merck execs insisted the deal isn't a change of control in order for Merck to keep Johnson & Johnson from grabbing international rights to Remicade and a follow-up drug.

However, Schering-Plough's corporate secretary, Sue Wolf, says the deal will likely be considered a change of control for the purpose of executive payouts, according to a Schering-Plough spokesman. So maybe these drugmakers want things both ways?

In any event, it would appear from reading the proxy that Schering-Plough execs were given big incentives to get a deal done. For instance, Fred would get only $37 million if he were terminated prior to a merger, but would receive $56.3 million if booted after a change of control, roughly the same amount under a change of control in which he remains without being terminated.

And Carrie Cox, an executive vp, would get $22.8 million if there's a change of control and $23.7 million if terminated after a change, but just $13.3 million if terminated prior to a change. And Bob Bertolini, the CFO, would $19 million with a change, $12 million if booted before a change and $27.5 million if shown the door after a change. With paydays like that, why hang around? The SGP execs could be big winners, and walk away with enough money to dole out their own stimulus packages (take note former Schering-Plough employees).

Assuming Fred wins, he may receive close to $60 million, anyway. His options may have been underwater or certainly worth less in recent months, but the deal with Merck is moving the stock closer to the December 2007 closing price. And that doesn't include another $3.9 million in phantom stock awarded late last month, while negotiations with Merck were taking place.

Whatever the final number, the payout will likely be memorable and may even generate some debate. On one hand, Fred managed to get a 34 percent premium out of Merck's board, which is better than nothing given the stock market these days. And for all we know, maybe a higher price will materialize if Johnson & Johnson were to bid over fears of losing those Remicade rights.

However, the flap over Vytorin clinical trial data happened on Fred's watch. There's also the notion that, at a time when the global economy is tanking and corporate excess is not cool, perhaps the payout is too large and the Schering-Plough board should have been stingier. What do you think?

Merck and Schering-Plough: Vive La Difference?

So Merck has overcome its institutional reluctance to commit to large-scale M&A and pulled the trigger on a $41 billion Made-in-New Jersey-deal with Schering-Plough.

Unlike a lot of observers who can lay claim to predicting this one, we counted ourselves among the skeptics that Merck would make this kind of move. That said, it's hardly a shocker, replete with cost-savings, synergies and other happy buzzwords that consolidation-hungry folks bandy about in discussing who's gonna pair up with whom. On to the highlight reel.

The deal specs:

• Values SGP at $41.1 billion in cash and Merck stock, a 34% premium to SGP's Friday close; Merck will borrow $8.5bb from JPMorgan to finance the deal.
• Allows Merck to get in on some of the diversity action Pfizer is after in its takeout of Wyeth. Merck gets Schering's animal health biz as well as its consumer unit, and bulks up its overseas presence (53% of the combined company's revenue will come from ex-US, 12% from emerging markets).
• Streamlines the firms' commercial activities and will account for $3.5 billion in annual cost savings by 2011 on top of what the two companies promised individually up until now.
• Gives Merck what it deems the necessary "critical mass" to absorb economic- and health-reform-driven shocks to the system, not to mention some interesting projects in a much deeper late-stage pipeline (like boceprevir in HCV and TRA in cardiovascular disease)
• And consolidates the operations and decision making from the two companies' cholesterol JV.

It also raises some interesting questions, including:

• Just how will Johnson & Johnson react to the quirky structure of the transaction, seemingly designed to allow "a new Merck" to hang on to the J&J-partnered rheumatoid artritis drugs Remicade and golimumab?
• Is the premium high enough?
• Despite being able to describe in detail earnings per share guidance for the combined company, why couldn't CFO Peter Kellogg break out the revenue numbers?
• For all the talk about very little overlap in the two firms' pipelines in terms of their molecules' mechanisms of action there's certainly plenty of therapeutic area overlap. Will this raise regulatory concerns?
• And how will adding sunscreen and dog-trackers to the famously science-driven Merck affect the company's DNA? And what was up with that spike in SGP trading volume and price last Friday?

We'll be all over this deal in the Pink Sheet Daily, the Pink Sheet and IN VIVO, tomorrow and in the days and weeks ahead, and of course we'll have some treats for you here on the blog too. Stay tuned!

The Politics of Merck’s Gardasil

Another tough week for Merck.

First, the Annals of Internal Medicine takes the company to task for running a "seeding" study of Vioxx at the start of the decade, a charge Merck disputes--but of course that only means more negative headlines.

Then, the New York Times upbraids the company for pretty much everything it has ever done with the HPV vaccine Gardasil—up to and including developing a vaccine for cervical cancer prevention in the first place.

The very next day (quite a coincidence, no?) the New England Journal of Medicine publishes an an article affirming the cost effectiveness of the vaccine in its currently indicated population of adolescent girls, but questioning the cost-effectiveness of vaccinating young women (aged 21-26). Not what you want to read when you have a supplement pending for use in the 27-45 population.

And, last but not least, another chapter in the Vytorin saga, with FDA issuing a public declaration that it is looking into the apparent association between the cholesterol drug combo and an increased risk of cancer seen in the SEAS trial. (And, no, as far as we know Merck has no studies suggesting that Gardasil prevents Vytorin-associated cancers.)

In that context, we think Merck may have dodged a bullet on Saturday morning, when Barack Obama issued the text message heard round the world, announcing Delaware Senator Joe Biden as his Vice Presidential running mate.

What does this have to do with Merck? We think the good news for the company is who Obama didn’t select—Virginia Governor Tim Kaine (pictured above). Kaine was an early front-runner for the pick, but was eclipsed in the home stretch when the Obama campaign decided to place a greater emphasis on foreign policy experience.

And Kaine is also featured in the New York Times piece, as a champion of mandatory vaccination as a condition of school entry. And, according to the Times, Merck did all kinds of stuff to make that happen, like (gasp!) investing in Virginia, and also (say it ain't so!) hiring lobbyists who used to work for the governor.

All kidding aside though, we’re guessing that Merck is just as happy not to have Gardasil so directly interjected into the Presidential campaign. At least, not right after the Times piece.

But we're betting that Gardasil will be talked about on the campaign trail this fall--and probably not in a context that Merck (or the rest of the industry) will welcome.

The HPV vaccine is, quite simply, a politically volatile project. Merck knows that better than anyone. During development, the company reached out to right-leaning religious organizations to help head off the perception that Gardasil would be a “sex vaccine.” But the company’s aggressive push for coverage mandates backfired with some negative publicity about the lobbying campaign—and even drew fire from politically liberal organizations that viewed coverage mandates as paternalistic or even patronizing.

And, somewhere along the way, Merck managed to alienate many in the public health community who you would think would welcome the vaccine with open arms. Including, for example, Diane Harper--one of the principal investigators on the Gardasil trials. Here is what the Times reports:

“Merck lobbied every opinion leader, women’s group, medical society, politicians, and went directly to the people — it created a sense of panic that says you have to have this vaccine now,” said Dr. Diane Harper, a professor of medicine at Dartmouth Medical School. Dr. Harper was a principal investigator on the clinical trials of both Gardasil and Cervarix, and she spent 2006-7 on sabbatical at the World Health Organization developing plans for cervical cancer vaccine programs around the world.

“Because Merck was so aggressive, it went too fast,” Dr. Harper said. “I would have liked to see it go much slower.”

(Conflict of interest mavens take note: The Times carefully chronicals some relatively modest payments by Merck to various experts who have spoken up on Gardasil's behalf, but does not offer any estimate of payments from Merck to Harper.)

Harper is not alone in expressing discomfort with Merck's sales approach. Public health advocates are excited to have so much investment in vaccines. But they are terrified that Big Pharma marketing tactics could taint the whole sector, and undermine the notion of vaccination altogether. (We've written extensively about this attitude before. Start here.)

Ironically, Merck's investors are having the exact opposite reaction. They are concerned that Gardasil sales are slowing down--as if the brand should replicate the Januvia-style growth curve, rather than the historic vaccine model. Imagine how disappointed they would be if Merck had taken the go-slow approach some of the public health advocates wanted!

So Merck finds itself in a bind: marketing a well-recognized pharmaceutical brand that raises red flags with some historically conservative groups (who still see a "sex" vaccine) and other traditionally liberal voices (who see in Merck's marketing of Gardasil all the worst of industry practices they want to change). Commercially, it is full steam ahead (because, after all, what choice does Merck really have except to make the most of its brands?)

There is some good news. Obama's health care reform agenda includes initiatives to expand insurance coverage to recent college graduates, an objective one Obama advisor described at a recent health policy forum sponsored by the National Journal as critical "now that we have things that are critical for young people, like HPV vaccines."

The question is: will that talking point be retired now that Gardasil may be just another short-hand for the problems of Big Pharma?

Insight + Preparation + Dumb Luck = Blockbuster

This blog has spilt plenty of bytes on the nasty consequences for GlaxoSmithKline, and for the industry, of the Avandia problem – but we haven’t said much about who’s likely to benefit. That part of the story we left to The RPM Report – and you can see that analysis here.

As Kate Rawson notes in that story, the two biggest big beneficiaries are Merck’s Januvia – the only DPP4 inhibitor on the market—and Amylin/Lilly’s Byetta. But Januvia is in many ways a more interesting business case study – and one we’ll talk about in a public fireside chat with Merck CEO Dick Clark at Windhover’s annual shindig in New York for the industry’s top business development executives, Pharmaceutical Strategic Alliances.

Clark -- pictured right -- ain't exactly the pin-up CEO. He's a manufacturing guy, from the blue-collar neighborhood of the drug industry. But he's managed a turnaround at the otherwise very white-collar Merck of impressive proportions, this being the company, that not so long ago, looked like a cartoon Gulliver hogtied by thousands of litigious Lilliputions.

And as Clark and I will discuss at the PSA meeting, much of that success is due to Januvia, the product of a nearly perfect blend of scientific insight and strategy, management skill and dumb luck.

Trailing Novartis by four years, Merck’s DPP4 team not only built a molecule that avoided one of the receptor subtypes hit by Novartis’ compound, Galvus, they managed to convince the FDA – although no one is saying so, publicly – that by doing so they’d made a safer drug. Thus Januvia never got hit with the FDA scrutiny Galvus did – and ended up with a safety label so compelling (a side-effect profile comparable to placebo) that this once-a-day pill, noted one diabetologist, has become “the first truly simple-minded therapy in diabetes.”

And probably the fastest beginning-to-end development program for any first-in-class primary-care drug in recent memory (seven years from discovery initiation to approval). Indeed, Clark and research chief Peter Kim had decided – given the company’s thin late-stage pipeline -- that Januvia was one of two drugs (the other was Gardasil, the cervical-cancer vaccine) absolutely crucial to Merck’s recovery from its disaster with Vioxx.

And so Clark created a multi-disciplinary task force around the compound, with its boss reporting directly to him. Bureaucratic hurdles fell away. And the launch was as nearly perfect as a major primary-care launch can be – five months after launch, the drug had captured a greater share of attention (nearly 40%) than nearly any of the recent successful primary-care launches. And it’s now on target for what analysts think could be $775 million in first-year sales.

(We should mention that Clark did the same thing – another multi-disciplinary task force reporting directly to him -- with Gardasil – on track for $1.5 billion in worldwide full first-year sales.)

And then there’s dumb luck. Januvia has been the extraordinary beneficiary of the misfortune of others--the Galvus approval delay, in the first place, and now Avandia. Merck therefore took 100% of the profit from the excitement Novartis helped generate around the arrival of a brand-new anti-diabetic class—but none of the negatives of Galvus’ apparent side-effects. Likewise, it’s taking the lion’s share of Avandia’s lost prescriptions.

And all of this despite the fact that Januvia ain’t that great a drug. Good as an add on. But not particularly powerful in itself. Instead, Januvia is the perfect drug for our era, when safety—particularly mixed with extreme simplicity--sells far better than efficacy alone.

The PSA conference will be a good time to question Clark on just how much a CEO matters in creating a blockbuster. We forecast his answer this way: some -- but dumb luck sure helps.

What Drug Makers Can Learn from Vaccines

Drug executives worried about rising safety hurdles, demands for larger trials and politicians’ growing influence on drug regulation could do worse than learn from their counterparts in vaccines.

Massive trial sizes and squeaky-clean safety have been part of the game in vaccines for years—since these are products given to millions of healthy individuals. “We’re used to these challenges,” Didier Hoch, President of Sanofi Pasteur MSD (SPMSD) told IN VIVO Blog this week.

And they’re used to dealing with a few of the other challenges drug firms are now facing, too, including demands for sound health economic and epidemiological data to support reimbursement and the need to engage not just with doctors, but a range of other stakeholders, too, including payors, policy-makers, patients and health workers.

As drug companies stumble, they too have to make the shift, as marketing gurus call it, from "share-of-voice" to "share-of-care". Many are still struggling to supply adequate cost-effectiveness data (and may as a result resort to risk-sharing reimbursement deals like Janssen-Cilag's UK proposal for Velcade).

Vaccines companies are used to dealing with politicians and policy-makers, since vaccines typically fit into national health care strategies. "We're already political," notes Hoch. "We already have the broader, global outlook" of how a product can improve public health and save costs, and the data to support that.

Hoch can point with confidence to cervical cancer vaccine Gardasil, which parent company Merck & Co. launched in the US last year and which is on track for blockbuster status, according to analysts. Indeed, Gardasil illustrates how vaccine products, as well as practices, are closing the gap with therapeutics--in terms of innovation, and price.

Gardasil is getting to market across Europe almost as fast as a classical drug (far faster than some traditional vaccines such as Wyeth's Prevnar against pneumococcal bacteria), according to Hoch, largely because preventing cancer is relatively novel. The crop of epidemiological and health economic data, plus the 30,000 + trial size, will have helped, too.

And at €330 per person (for three doses), Gardasil knocks down the old theory that vaccines don't command premium prices. (Though it’s still cheap enough, relative to some cancer drugs, for authorities to reimburse, as they have agreed to do in all of the largest European markets, other than the UK.)

Now sure, vaccines have been hot for some years now: bioterrorism and bird flu were just some of the factors that led to a scramble of Big Pharma (and little biotech) into the field; some returning to what they’d earlier cast aside.

They will get hotter still. Scientists are figuring out how to vaccinate against a wider range of conditions--including ones that haven’t even arrived and may never will, like bird flu. As we reported a few weeks ago, Novartis just committed up to $500m for an anti-smoking vaccine from Cytos. SPMSD and others have more novel vaccines, like Zostavax for shingles and post-herpetic neuralgia, in the pipeline.

Meanwhile, FDA and other regulators are becoming increasingly sceptical of drugs that treat the symptoms of disease, and looking for products which get closer to addressing the cause, or progression, of certain illnesses. Preventing them altogether is even better. And cheaper.

Small wonder, then, that Hoch has, over the last couple of years, had a direct reporting line into Sanofi-Aventis’ outgoing big boss, Jean-Francois Dehecq. Vaccines matter (and perhaps even more now, after one-time-potential blockbuster rimonabant’s big stumble).

SPMSD sets one final example that drug firms might take note of: R&D cooperation. Sanofi Pasteur MSD was created in 1994 as a joint venture between Sanofi-Aventis and Merck. Any vaccine in either company’s pipeline passes to SPMSD after Phase II for further development, approval and marketing in Europe.

The JV was set up because vaccines require large up front investments and significant regulatory expertise, including understanding of, and links to, each European government's policy-makers and approval system.

Given the rising costs and falling productivity of R&D in regular drug firms, pooling costs and risks doesn’t seem a bad idea.