Pharma’s Cutting Edge

Yesterday, the U.S. FDA approved Tercica’s Increlex (recombinant hIGF-1) as an orphan-status treatment for short stature in children with severe primary IGF-1 deficiency. The press release and Tercica’s website can provide details on the drug and why it is important to Tercica, to the U.S. community of pediatric endocrinologists and to their short-stature patients who will benefit from the drug. I simply wanted to express my own views of the historic importance of this event, which was appropriately understated by the company during their investor conference today. This is the first new treatment for short stature in over 20 years, since the approval of recombinant human growth hormone. More importantly from the historical perspective, this particular new treatment is native rhIGF-1, one of the first bioengineered human proteins ever created (six years after recombinant human insulin was synthesized). It has taken a long time for its appearance in the pharmacy for many reasons. Genentech spent quite a long time debating the clinical and commercial value of the product, even as they conducted and sponsored clinical trials in a wide variety of clinical conditions. While they were debating, long-term treatment data accrued from children with severe short stature due to a primary deficiency of IGF-1. It was these data that provided the basis for yesterday’s landmark approval. Increlex undoubtedly will make a major difference to the lives of many children with severe primary IGF-1 deficiency, who currently do not respond to other therapies (about 6,000 in the U.S.). What is particularly exciting for Tercica and its investors is the potential for Increlex to be used to treat a broader population of IGF-1 deficient children who currently must use very high doses (at very high cost) of growth hormone. This potential is currently being studied by Tercica and its clinical investogators. In addition to Tercica’s internal programs, we can expect that Increlex will be studied and used “off-label” in a number of other conditions with unmet needs including: short stature that is poorly responsive to GH, severe insulin-resistant diabetes, acute and chronic renal failure, amyotrohic lateral sclerosis and other neuromuscular diseases, osseous defects and fractures and severe injury and other states associated with hypercatabolism. This is indeed an historical and important occasion. (Disclaimer: I, and entities I control, own stock in Tercica).

Great. Now Wall Street analysts’ analyses of spontaneous adverse event reports are being reported by the mainstream press. The WSJ story (“MS Drug Tysabri May Be Tied To Other Serious Side Effects.” By Sylvia Pagan Westphal. The Wall Street Journal. August 29, 2005–no longer available online) reports that Dr. Steve Harr from Morgan Stanley described reports of serious adverse events usually associated with immunosuppression among Tysabri users. It doesn’t say whether Harr contacted any experts to help him interpret the data. Once again, this is an example of what can happen when spontaneous adverse event reports are made accessible to the public without FDA qualification. Anyone can currently ask for and receive AERS reports for any marketed drug in the U.S. The data are sent, after some delay, without FDA interpretation, leaving the recipient to determine what the data mean for herself. The recipient is free to report his interpretation publicly. We’ve seen already what happens when these data are interpreted by groups with an agenda, such as investigative reporters and Public Citizen. Now, imagine what will happen if FDA follows through on its proposal to disclose such events in near real-time on its website. I’ve warned readers about this before. If the industry doesn’t lobby harder to stop it, it will happen. Don’t get me wrong, I’m in favor of a more transparent FDA. But I’m not in favor of disclosing information for information sake. Information without interpretation and context can do more harm than good. FDA’s Office of Drug Safety, and its new drug safety oversight board, are in the best position to provide this interpretation and context. If transparency is what FDA and Congress want, they must take responsibility for ensuring that drug-safety information is accompanied by guidance. If FDA can’t handle the task with its internal staff, then they will have to contract it to a third party. Otherwise, investors are in for a very bumpy ride as new data are disclosed, and the public at large is in for a very confusing period when they and their physicians will not know what to believe about their medications.

Looks like the Seattle Times wants to make sure their researcher-investor “matchmaking” story stays on the top stories list for a while longer. Here they’ve decided to look at FDA’s Scott Gottlieb and his ties to the investment industry and to Gerson Lehrman in particular. I wasn’t aware of Scott’s GLG ties but not surprised. One has to wonder: what was FDA thinking when they appointed a 33 year-old former investment banker and biotech-investment newsletter writer, who has little formal healthcare policy training, into such an important, attention-grabbing position at FDA? I didn’t understand it when I first heard it, and now that this story is out, many others will undoubtedly be asking the same question. No offense, Scott; I’m sure you are a really smart, thoughtful, and charismatic sort. But you can’t expect to make a jump like that and get away with it without a lot of people noticing and questioning it. Will he be asked to resign? Probably not. Should he resign? Yes. In the current climate appearances of conflict are nearly as important as conflict itself and should be eliminated whenever practical. It sucks, but that’s the reality. Scott’s been at FDA for a short enough time that FDA can nip this problem in the bud before it gets out of hand. I also think that Lester Crawford, the FDA Commissioner who appointed Scott, should be asked to resign for showing such poor judgment. But that probably won’t happen either.

I have to say that I am puzzled by this AP report from Theresa Agovino as published in today’s Miami Herald. The report alleges that Merck, apparently aware of cardiovascular problems with Vioxx, sought to reformulate Vioxx to make it safer. I am puzzled, because I believe that I have read the patent referred to in the story (WO9945913; although I don’t know for sure, because the article doesn’t cite the patent number), and I can’t find anything in it that suggests Merck was trying to fix a COX-2 inhibitor problem. Indeed, that is exactly what Merck’s lawyer says in the article. The patent simply refers to a method of co-prescribing COX-2 inhbitors with certain platelet aggregation inhibitors, with the rationale that inhibition of COX-2 has the potential to reduce chronic low-level infalmmation in the vessel wall, thus enhancing the anti-thrombotic effects of platelet aggregation inhibitors when used alone. Unless there is some evidence lurking in Merck’s labs that indicates another motive behind this patent, it is hardly a smoking gun as suggested by the story. Supporting this, the patent was not used by the plaintiff’s attorney in the Texas case. When asked why, attorney Mark Lanier said he wasn’t aware the patent existed. Frankly, I find this hard to accept, given that I was able to locate the patent using a simple three-term search strategy in about 1 minute. The title of the patent: “COMBINATION THERAPY AND COMPOSITION FOR ACUTE CORONARY ISCHEMIC SYNDROME AND RELATED CONDITIONS” is a little hard to miss.

At the time of the announcement that OSI was buying Eyetech, prior to the market open today, OSI was offering what amounted to $20 a share for Eyetech, a 43% premium over Eyetech’s closing price last week. The offer consisted of $935 M (75% cash, 25% OSI stock at $40.73 a share). OSI would be issuing additional stock, giving EYET shareholders 10% of the combined entity and OSIP holders an 11% dilution. As I write this, Eyetech is trading up roughly 30% over Friday’s close at 18.10 a share, and OSI is trading down roughly 21% at $32 a share. Is this a good deal for stockholders of either company? Based on “analysts” comments, the Street believes that the deal is bad for both parties, but worse for OSI holders; they argue that OSI is overpaying for Eyetech and that OSI will have difficulty creating synergies from the merger. I believe the opposite–Eyetech is worth far more than what OSI is offering, made even worse by the pounding OSI stock is taking. Post-Reg FD, the Street gets long-term product sales projections wrong as often as it gets them correct (i.e. you could do just as well flipping a coin). In the case of Eyetech, they have it wrong. Specifically, most analysts have overestimated the impact of competition from Lucentis (Genentech) on sales of Eyetech’s Macugen by a large margin. No doubt OSI recognized this, as will any other firm that looks carefully at Macugen’s potential. As a result of the depressed market value for Eyetech, OSI correctly assumed that they could convince Eyetech’s management to sell out for less than the IPO price with a sweet package that provides bonuses and employment contracts. But it needn’t be so. Eyetech shareholders have the opportunity to vote down the deal, and they should. In the meantime, look for the distinct possibility of Pfizer making a counter-offer for Eyetech. (Disclaimer: I own shares and/or options in Eyetech and OSI).