The Friday Five – 5 questions raised this week in pharma

July 3, 2014
Ref: The Friday Five Desk

Does Genentech's Seragon deal shift the goalposts for the value of biotech licensing deals, acquisitions?

This week's announcement that Genentech is to acquire Seragon Pharmaceuticals for potentially up to $1.7 billion sparked further debate around Big Pharma's R&D externalisation strategies.

With Roche's Genentech division widely regarded as the industry's premier oncology R&D player, does the sizeable upfront payment made to Seragon for its Phase I asset ARN-810 mark a shift in the valuation benchmark that competitors will be willing to work towards?

Some have suggested that the Seragon deal is further evidence of the inflated valuations currently ascribed to biotech companies and early-stage pipeline assets, which statistically face challenging odds if they are to successfully reach the market.

If a hefty up-front payment is out of character for Genentech, however, then this perhaps suggests that the deal should not be viewed as any form of precursor to more aggressive external R&D spending on the part of the oncology specialist.

While Seragon CEO Richard Heyman is seen to be living the biotech dream by successfully delivering two $1 billion divestments in the space of a year, the previous sale of ARN-510 to Johnson & Johnson in August 2013 (when the biotech operated under the Aragon Pharmaceuticals name) may have removed some of the typical risk associated with Genentech's early-stage deal, a number of industry commentators told FirstWord. Echoing this view, analysts at Morgan Stanley suggest that Seragon has already demonstrated a strong track record, validated by Johnson & Johnson's acquisition of Aragon. See ViewPoints: Lightning strikes twice for Seragon management as it lures Roche at $1.7 billion price.

That said, while Genentech may have confidence in its newly acquired asset, other early-stage biotechs must be rubbing their hands with glee as valuations show no sign of declining.

See also ViewPoints: Is Gilead the king of M&A? – more importantly can it retain its crown?

Will Copaxone generics reach the US market in 2014?

Much to the benefit of Teva, it would appear that the FDA has become hesitant about approving generic versions of the company's multiple sclerosis treatment Copaxone, for which US patent exclusivity expired in late May.

According to analysts at Citi, the first generic Copaxone approval is now likely to occur near the end of the year at the very earliest, due to the FDA requesting gene expression and immunogenicity data from each generic Copaxone developer. The administration may also require immunogenicity data from in vivo tests in humans, which could imply a six- to nine-month delay to approval of the first generic. Momenta Pharmaceuticals has reportedly already responded to these requests, with new data set to take at least a couple of months to review, adds Bernstein analyst Ronny Gal.

With the FDA yet to provide specific guidance relating to the development of generic Copaxone, a regulatory pathway will likely be elucidated with approval of the first generic, note Citi analysts. When this will occur remains unclear; the FDA clearly has "residual uncertainty" regarding approval, adds Gal.

Teva should also be congratulated on forcing the issue with the FDA, suggest analysts, and it was confirmed on Thursday that a further Citizen's Petition has been filed by the company in accordance with the regulator's procedural guidance and to facilitate public review and comment on new scientific data relating to gene expression. An extremely successful 'switching strategy' to a higher dosage form of Copaxone has also helped to drive improvement sentiment at the company since the beginning of 2014, supported by clear visibility on the direction that new CEO Eyal Desheh is taking Teva. See also ViewPoints: Teva's Copaxone conversion continues to slow, but a 'hard switch' looks unlikely.

Has the FDA done enough to avoid further controversy over generic Diovan?

Although it was confirmed this week that generic Diovan will at last become available in the US as of later this month, controversy over the delay to its availability is unlikely to dissipate quickly.

Expiration of patent exclusivity for the Novartis hypertension drug – which together with the already genericised Co-Diovan formulation generated US sales of $1.7 billion in 2013 – occurred 18 months ago. However, Ranbaxy has not launched its generic due to ongoing quality control issues being investigated by the FDA.

Despite pressure from rival generics manufacturers, the FDA chose not to rescind Ranbaxy's previously granted marketing exclusivity for generic Diovan, a decision that has cost consumers and healthcare providers millions of dollars, argue some.

One issue of continued debate is whether such a scenario could occur again and what the FDA would potentially do differently. The other could be how the FDA has facilitated Ranbaxy's now confirmed launch of generic Diovan via its US-based manufacturing facility in Ohm. Bernstein analyst Ronny Gal told FirstWord "the agency was under enormous pressure to get the generic product out and have found a compromise." Ranbaxy's challenges with the FDA are thus likely to be far from over; the agency's next step will be to consider how it can facilitate approval for generic Nexium, which lost patent exclusivity last month. Like Diovan, Ranbaxy holds market exclusivity rights on the generic.

See also ViewPoints: Approval for generic Diovan – breakthrough for Ranbaxy or FDA compromise?

Where will the FDA side on the biosimilar naming debate?

A coalition of payers, pharmacies, health insurers and unions wrote to the FDA this week urging the administration not to require distinct international non-proprietary names (INNs – i.e. generic names) for approved biosimilars. They argue that should biosimilars be required to have a distinct INN, this could cause confusion and a barrier to uptake and thus potentially dilute the cost saving impact of biosimilars.

As part of a long running debate, the counter argument from branded biologics developers is that use of identical INNs could impact patient safety and the ability to successfully trace the use (and possible side effects) of biosimilar products.

Such issues have yet to be realised in Europe where identical INNs for branded and biosimilar biologics have been used for some time. It is in the US, however, where the biosimilar naming debate will potentially have its most profound implication, given that the FDA is working towards guidance on biosimilar substitution.

Click here to see what oncologists and rheumatologists (based in the US and EU5) who were polled by FirstWord in February think about biosimilar naming conventions.

See also Spotlight On: Europe appears committed to naming convention for biosimilars, but can industry lobbying persuade the FDA to take a different route?

Can Alfred Mann prove the doubters wrong?

Some may continue to scoff at MannKind's efforts to revive the market for inhaled insulin – a market where Pfizer's marketing strength and know-how proved insufficient no less – but the company and its CEO Alfred Mann cannot be accused of lacking perseverance.

At the third time of asking, this paid off last Friday when the FDA approved Afrezza for the treatment of type 1 and 2 diabetes two weeks earlier than expected. An encouraging sign, suggested some analysts, but most agree that it will be the economic details of any partnership secured by MannKind that will dictate whether Afrezza delivers commercially.

While MannKind's drug offers an improvement over Pfizer's Exubera, it will face similar challenges that could limit its positioning to that of a niche therapy for diabetics, argue analysts at JP Morgan. Pulmonary toxicity remains a concern of the FDA, as evidenced by a black box warning, as does the theoretical risk of an increased risk of lung cancer; factors that are also likely to see MannKind's expenditure on post-approval safety requirements swell. The safety message is one that also appears to resonate with endocrinologists. Physicians may use this drug – which offers an alternative approach in treating diabetes – but it may take time. MannKind has demonstrated one form of long-term commitment to Afrezza – can it afford to retain such a philosophy?

See Physician Views Poll Results – In for the long haul; post-marketing safety data will be key to driving uptake of inhaled insulin.