BNET Pharma

Pfizer and Glaxo confirm layoffs — The rumored cuts at Pfizer, though still unspecified in number, have been confirmed by the company. Pfizer is suspending R&D in several areas, most notably heart disease, its big profit-maker for decades. Meanwhile, GSK is cutting 850 R&D jobs (six percent of its workforce). [Source: In the Pipeline, PharmaGossip]

Cephalon ordered to disclose doctor payments — Forced transparency is the cherry on top of Cephalon’s big federal punishment sundae for off-label marketing, as the Department of Health and Human Services orders the drug company to prominently display a list of the doctors it employs as speakers or consultants. Cephalon is the first drug-maker to receive such a federal mandate, though the news comes in the wake of voluntary promises from Lilly and Merck, among others. [Source: WSJ Health Blog]

Prasugrel delays not dire for Lilly — Over at In Vivo, Kate Rawson speculates that the delays plaguing the approval process for Lilly’s prasugrel aren’t as bad as everyone thinks (Lilly’s stock dropped when the news was announced). Rawson points out that most recent drugs which have faced delays at this point in the process have eventually moved forward, and that the FDA probably needs extra time for the drug’s complicated application. [Source: In Vivo]

Docs dislike pharma sales reps — Or at least want to see less of them. According to a survey commissioned by Publicis Selling Solutions Group, 90 percent of doctors want to “see fewer reps in their practices.” They also want better-educated reps who can sell with science. [Source: Medical Marketing & Media]

Cephalon agreed yesterday to a $444 million settlement with the Department of Justice that will control its marketing of Actiq, Provigil and Gabitril. (Scroll to the bottom of this page if you want to read the prosecutors’ documents describing the scale of wrongdoing at the company.)

The company admitted that it promoted Actiq for various types of pain, under the mantra “Pain is pain,” even though it was only approved for cancer pain. As for Provigil, the company promoted that drug to combat any kind of sleepiness, and not just diagnosed narcolepsy for which it is approved.

A doctor associated with similar activity was caught by the FDA doing something like this last year.

Which kind of explains why Actiq and Provigil just seemed to be everywhere in the last few years, even though they’re supposed to be used only rarely.

It brings to mind a similar agreement signed by Eli Lilly in 2006 over its off-label marketing of Evista. That agreement essentially handled complete oversight of Evista’s marketing to prosecutors. It’s still in effect.

The Cephalon deal, brought in also for off-label marketing, contains even more strict provisions than the one Lilly signed. The provisions include:

• The deal includes a “corporate integrity agreement” (CIA) which for the next five years covers virtually anyone associated with the marketing of these products.
• Cephalon staff must work under a chief compliance officer who shall use the CIA to create company-wide rules.
• The compliance officer must not be subordinate to the general counsel or the CFO.
• All Cephalon’s marketing vendor agencies will be covered by the CIA.
• The company must track and report incoming inquiries about off-label use of products.
• “Any third party activity” must be covered by the CIA.
• This includes payments to doctors.

You can read the DOJ press release here, the corporate integrity agreement here and the sentencing memo here.

Cephalon’s spin on the matter is here.

Ever since Eli Lilly launched Prozac in the U.S. in 1987, Americans have had a love affair with anti-depressants. Prozac isn’t just a pill. It was the cultural touchstone of 1990s — as a lifesaver, punchline and punching bag.

When Prozac went off-patent in 2001, something interesting happened: the market for new anti-depressants stayed robust instead of being swept away by cheap generics. Today, branded antidepressants are a $2.4 billion-per-quarter market that is still growing.

This remarkable mix of business, psychiatry and chemistry deserves a closer look. This is the first of three posts in which BNET will look at the state of the branded antidepressant market in the wake of Prozac. Part 1, today, deals with current sales and strategies. Part 2 will look at controversies in the category. And Part 3 will examine the future of the market as more pills head toward generic status.

Second quarter sales of branded antidepressants:

• Effexor XR  … Wyeth          … $1.02 billion
• Lexapro      … Forest Labs  … $583 million
• Cymbalta    … Eli Lilly         … $519 million
• Paxil CR      … GSK               … $253 million
• Total:                                     … $2.4 billion

The market is essentially divided into two halves: Cymbalta and Effexor vs. Lexapro and Paxil. This is because Cymbalta (pictured) is growing at 26% and Effexor is growing at 5% (off the largest base). By contrast, Paxil sales declined by 18% (in part due to currency exchange bias) and Lexapro’s dollar sales were only up a relatively anemic 5.6%, and it is losing share, according to Deutsche Bank.

Now that Paxil has gone generic, GlaxoSmithKline is essentially trying to keep alive a brand that is essentially in a zombie state. What’s interesting here is that while generic Paxil is eating Paxil CR alive, Wyeth has essentially the same problem with generic Effexor and Effexor XR and yet has held onto a massive amount of business. This is due in part to Wyeth’s successful legal strategy, which held off the appearance of a generic XR version until 2011, and gave Wyeth time to shore up its franchise.

Lilly has been exceptionally aggressive in its promotion of Cymbalta, with heavy spending on a TV advertising campaign, titled “Depression Hurts.” Lilly has also pursued new indications for the drug, with has been approved for nerve pain and fibromyalgia.

Forest, meanwhile, has obtained praise from analysts for its ability to keep Lexapro in a favorable position on formularies despite the many generic alternatives available.

The strategic lesson to be learned is that simply launching a new patent-protected pill is not enough. Marketing, legal and formulary strategy must all ride in-sync. Even so, as GSK is currently learning with Paxil, all good things must come to an end.

• BNET Focus on Antidepressants
• Part 1: Sales and Strategy
• Part 2: Controversies
• Part 3: The Future of the Industry

Shire officially warned for misleading YouTube video — A YouTube video promoting Adderall XR has earned Shire an FDA warning, as statements by Ty Pennington stating that the drug can “change lives” are excessive promises in the federal opinion. YouTube videos are evidently (if not surprisingly) subject to scrutiny as close as that given to traditional ad campaigns. The video is no longer online, but the narration in question can be seen here. [Source: Eye on FDA]

Cardinal Health betting on China’s emerging drug marketplace — Over at Drug Channels, Adam Fein reports that China will be the world’s fifth-largest market for legitimate pharmaceuticals within a few years. A number of drug-makers are tweaking their China strategies, with Cardinal Health focusing on distribution, not manufacturing. Jason Chen, the company’s head of ops in Asia, discusses China and more in an interview. [Source: Drug Channels]

Mystery Imclone bidder to be revealed (maybe) on Wednesday — Speculation abounds over which mysterious pharma company has offered $70 a share for ImClone. It could be Pfizer, Lilly, or… who knows? Well, if the bidder backs off, we’ll find out who it was on Wednesday night, as promised in a press release. Otherwise the excitement may continue. [Source: Pharmalot]

Can billions lost as patents expire qualify pharma for federal aid? — Not likely, but as lawmakers propose bank bailouts and develop the “troubled asset relief program,” John Mack at Pharma Marketing News wonders if pharma companies can get in on the aid action. The industry is losing billions of dollars this year due to expiring patents on blockbuster drugs — GlaxoSmithKline, for instance, stands to lose the $8.5 billion Advair, Serevent and Lamictal raked in when they were protected. Do those count as “troubled assets,” too? Yes, such losses are no shock, but neither are those facing the recently-bailed-out auto industry…. [Source: Pharma Marketing News]

Today came the news that Eli Lilly is one of the mystery suitors in the ImClone deal that Bristol-Myers Squibb was just booted from.

If CEO John Lechleiter were to scoop up ImClone — thus bolting on the cancer specialist’s pipeline to replace the absence of its own — it would be just the sort of dramatic act that he seems to favor.

Either that or he’s flailing around, looking for extra revenues from a company that is failing to produce them. Right now it’s hard to tell which. After all, this is a company that hasn’t produced a new drug in three years.

Consider recent history:

When he got the job at the beginning of this year, Lechleiter could fairly have expected to inherit the position just in time for Lilly’s new blood-thinner, Effient to hit the market. But with the FDA repeatedly delaying its approval of Effient, Lechleiter has been forced to ask what else is in Lilly’s bag of tricks — and he has discovered that the answer is not much.

Last week, Lechleiter gave a big speech. Midwestbusiness.com said he “thundered”:

We’ve embarked on a transformation - the likes of which our company has never experienced.

To be fair, it’s the same sort of transformation that Pfizer, GlaxoSmithKline and all the others are undergoing right now — a desperate search for a way to avoid the 2011 patent cliff. Lilly’s position in that race of lemmings is especially dire. Zyprexa expires in 2011 and Cymbalta expires in 2013. Lechleiter is proposing layoffs, of course. The company’s late-stage pipeline is thin, according to analysts. If you look at Lechleiter’s second quarter earnings call, you’ll notice that he leads off by talking about new drugs entering phase I rather than those emerging from phase III.

Also note in that call that Zyprexa was not approved as a long-acting injection, and that Lilly bet too early on the Effient approval and blew a bunch of money pre-marketing the drug, thus unnecessarily increasing the company’s expenses.

The Zyprexa news is telling because it is indicative of Lilly’s core marketing strategy right now: In the absence of actual new drugs Lilly is attempting to add indications and uses to its existing drugs.

In some cases, the company has stretched claims for its existing drugs so far that people have begun to notice. The FDA slapped the company’s wrists for its marketing of Strattera, saying it had falsely broadened the drug’s indication and wrongly implied that its side effects were transient when, the FDA said, it had failed to present evidence that was the case. Lechleiter himself was accused of this kind of stretching in 2003, when an email surfaced in court that implied he encouraged off-label promotion of Zyprexa.

Similiarly, the company was caught by the blog ClinPsyc publishing the same study in two different journals in violation of one of those journals’ policy prohibiting such.

And as I noted recently, the bloom may be off the Byetta rose.

Analysts have also begun to notice this sort of desperation. In the last call, David Risinger of Merrill Lynch asked whether increased revenues from yet another extension of the indications for Cymbalta weren’t showing up because the drug was already being used for that purpose off-label. He was assured that it was too early to tell.

All of the above means that Lechleiter is under considerable pressure to do something. ImClone would fit that bill.

Who’s buying ImClone? — The hostile takeover drama between ImClone and Bristol-Myers Squibb remains unresolved, leaving more unanswered questions than a soap opera cliffhanger. Why did BMS’s only representative on the Imclone board resign earlier this week? Will Imclone CEO Carl Icahn and BMS head Jim Cornelius spar and insult their way through further press releases? Will the identity of the $70-per-share bidder on Imclone by revealed? Tune in next week! [Source: In the Pipeline, AP via Forbes]

Generic thalidomide submitted for approval — Barr Labs has submitted an ANDA for a generic version of thalidomide, the birth-defect-causing drug which shocked the world into more strident drug regulation in the sixties. The drug is currently marketed by Celgene as Thalomid. [Source: In Vivo]

Boston cancels drugs-from-Canada program — After all the hubbub a few years ago over Canadian generics, U.S. consumers may be satisfied with domestically-available prescription drugs after all. A program allowing employees of the city of Boston to procure drugs from Canada has been cancelled due to lack of interest. [Source: WSJ Health Blog]

Genentech VP on operational excellence: “People, process, and technology” — Patrick Yang, executive VP for product ops, shared “9 behaviors of world class organizations” and “10 essential qualities of great manufacturing leaders,” as well as his views on the industrialization of biotech, at a pharma manufacturing conference. [Source: PharmaManufacturing.com]

As companies bail out of the inhaled insulin business — most recently Pfizer, which lost $2.8 billion before throwing Exubera overboard — one small firm believes there is an alternative to pills, injections and inhalers.

Generex, a Worcester, Mass.-based company, believes there’s an opportunity for insulin delivery in a liquid spray. It isn’t inhaled into the lungs, however — the spray is directed at the lining of the mouth where the insulin is absorbed. The company’s product, Oral-Lyn, is approved in Ecuador and India (where it is marketed by Shreya), and is in phase III trials for approval in the U.S.

I spoke with Dr. Gerald Bernstein (pictured), a former president of the American Diabetes Association and now Generex’s vp of medical affairs, about why he believes Ora-Lyn won’t meet the same fate as Exubera. Our questions and answers have been edited for flow.

BNET: What’s wrong with inhaled insulin? It seems like a good idea in principle, no injections.

Bernstein: The biggest thing that’s wrong is utilizing the fragile alveoli membranes to transport proteins. It’s basically, biologically, been designed to transport gases and not solid molecules and almost all pharmacology to the lungs is exactly that, delivery to the lungs not through the lungs. It was very apparent going back 10 years that only a small percentage of the endocrine community was at all interested in the use of a pulmonary insulin product. There were people in the scientific community who were concerned about the impact on [cancer] growth factors because of the insulin that was delivered, 20 percent got into the alveoli and the other 80 percent sat in the bronchial system, so was there an implied risk. There were six lung cancer cases that were found in the Exubera group. There’s no proof that [Exubera was to blame] but the fact is clinicians weren’t willing to take that chance.

BNET: With Oral-Lyn, insulin is absorbed through the mouth. If absorbing insulin through the inner cheek is such a good idea, why hasn’t anyone else thought of it before?

Bernstein: There’s an extensive literature on peptide and small proteins and trying to have them absorb through the mouth, but the fact is that it’s not easy. Although people have been writing about it, nobody has taken it far enough to have a model of predictability. When you get into larger molecules they don’t regularly cross, but Oral-Lyn has the right combination of ingredients prepared in the right way to allow it to predictively penetrate.

BNET: What exactly is in Oral-Lyn?

Bernstein: It’s human regular insulin, it’s put into a liquid formulation [with a spray propellant]. The formulation results in tiny bubbles called micelles that are greater than seven microns and therefore cannot go into the lungs. So in no way, fashion or form does this parallel a pulmonary insulin product. The product is sprayed into the mouth. Once it gets through the superficial layer [inside the mouth] the number of blood vessels is so rich it goes right into the bloodstream. It’s very simple, it’s very fast. When it’s finished it doesn’t hang out. For people with diabetes that’s very important because if you don’t have extra insulin hanging around, you reduce the risk of low blood glucose. And finally it’s delivered with an asthma-like device. So it’s very familiar to doctors and patients. There’s no intimidation to people using it. No one will know you have diabetes, which is very important.

BNET: I’ll bet it tastes disgusting.

Bernstein: It actually has no taste. What you get is a cold sensation from the propellant. When you spray you literally start eating the next minute. It will peak in 30 minutes. And most important it’s finished in two hours without a tail. The lack of a tail reduces the risk of low blood sugar or hypoglycemia. Because it’s so fast you have the flexibility — maybe you want a dessert, you can spray again. We recommend that the person splits the dose and sprays half at the start of the meal and half right after. It turns out to be more efficient that way.

BNET: How does it perform in terms of A1C, the yardstick glucose measurement for diabetes?

Bernstein: In our early studies in type 2 diabetes it showed that when Oral-Lyn was added to a failing regimen it reduced the A1C by as much as 1%. By anybody’s standard that’s superb.

BNET: Did it bring A1C down to 6.5 percent? That’s the gold standard. Many diabetics have A1C at 9 percent and above.

Bernstein: What we looked for was, can it bring the A1C down equal to or better than other forms of bolus insulin, such as regular, Novolog, Humalog, and Apidra? We’ve shown that, but we haven’t done a specific study where the endpoint was a low A1C. In our studies to date the A1C has come down but it wasn’t the specific endpoint. Non-inferiority is what we’ve been aiming for because that’s what the FDA requires.

BNET: What about side effects?

Bernstein: It’s extremely safe by all the studies that have been done [so far], including two years in animal tests. We haven’t seen allergic reaction. The lining of the mouth hasn’t shown any abnormalities. The buccal mucosa is an extra-tough and resilient tissue, it’s beaten up all the time. People bite themselves or burn themselves. Whatever doesn’t get absorbed is going to go to the stomach. Now the insulin molecule is unprotected and therefore it will be denatured by the acid and then broken down. There are no side effects. It’s like eating a piece of meat.

BNET: What are the limits to the device?

Bernstein: Each puff represents one unit to the body. If someone requires 10 units they would require 10 puffs. It can range from four or five and up. My own feeling is, once you begin heading through more than 15 units that’s too many puffs, I think people would get tired of doing that.

BNET: If this product is so good, why haven’t you been acquired or given a marketing deal by a major pharma company?

Bernstein: Certainly everybody looks at us and has contacted us but that’s [not my decision]. There were a couple of things that were inhibitors early on. The simplicity of Oral-Lyn was very disarming, especially with the huge cloud that pulmonary insulin put over the whole sector of alternative delivery. The handful of abstracts and presentations that might have come from Generex were completely overshadowed by Pfizer.

Merck latest to announce transparency policies — As the Physician Payments Sunshine Act approaches Congressional approval, Merck has announced a plan to publicize the grants they offer medical organizations and speakers. Earlier this week, Lilly made a similar promise, and several other pharma companies have recently retooled their disclosure policies. [Source: Pharmalot]

Pfizer embracing collaborative R&D, maybe cutting jobs — Reuters quotes Pfizer’s global head of R&D Martin McKay saying he would “certainly like to do more” collaborative development with other drug companies, citing Pfizer’s partnership with Bristol-Myers Squibb as “excellent.” Meanwhile, In The Pipeline’s Derek Lowe reports that Pfizer may soon make “deep cuts” to its therapeutic research staff.  [Source: CoreyNahman.com, In The Pipeline]

GlaxoSmithKline spends most on ads — FiercePharma reveals the big ad spenders among top pharmaceutical companies. GSK spent $2.46 billion on advertising in 2007, followed closely by Johnson & Johnson’s $2.41 billion. Boehringer Ingelheim’s 2007 ad budget saw the largest increase (163 percent) from 2006. [Source: FiercePharma]

Consumers buying fewer prescription drugs — Consumers are cutting back on health care costs, and one consequence is that the number of prescriptions filled in the U.S. declined two percent from last year, the first drop reported in at least 12 years. [Source: WSJ]

Sanofi-Aventis has become the latest drug company to get into the online video game business. This time, it’s for its ubiquitous sleeping pill, Ambien CR. The game is called “Silence Your Rooster.”

The game is part of Sanofi’s ad campaign for Ambien, which the Wall Street Journal decided was controversial a couple of weeks ago because it was unbranded. (Although given that drug companies have been running unbranded campaigns for years, most people in the business were left scratching their heads as to why the Journal thought this was still news.)

BNET regulars will remember that Sanofi is not the first company to conclude that the world needs a video game produced by a pharmaceutical company:

• Pfizer already launched the “Viva Cruiser” driving game for Viagra.
• And, more than a decade ago, Novo Nordisk produced “Captain Novolin” for the Super NES platform.

The one thing they all have in common? They’re not exactly delivering the kinds of thrills you’ll see in Metal Gear Solid 4. (Continued below, after gameplay screen capture.)

In “Silence Your Rooster,” you play an insomniac lying awake in your bedroom. Your peaceful night’s sleep is constantly interrupted by the sudden appearance of crowing roosters at the foot of the bed or in the closets and bedroom windows. By moving and clicking your mouse, you can throw pillows at the roosters to silence them.

As the game progresses, the roosters come faster and faster and the game becomes more difficult. In fact, several attempts at the game leave players with the impression that the final few seconds of each game are rigged — no matter how fast you click you can’t get enough pillows flying to kill the roosters.

The other drawback is that your final score is never displayed — making it impossible to know how you did. At least with “Viva Cruiser” you knew how many points you’d won.

Sanofi declined to comment on the game except to say that it was launched in August along with the rest of the campaign.

Pfizer pulled its advergame after getting a rap on the knuckles from the FDA about an unrelated online video effort, also for Viagra. Sanofi, one presumes, feels that its game won’t have the same fate.

Medicis stock tumbled roughly 16 percent yesterday after it announced that it would restate six years of its numbers due to an accounting error.

But the magnitude of the fall seems to have drawn attention not to the vanity pharma company’s inability to count beans, but the weakness of its key Solodyn acne franchise, and the fact that Allergan, the company’s chief rival, is poised to pounce with a rival product. (Some history of Medicis’ current predicament can be found here.)

A closer look at the accounting indicates that — at least at first blush — it may not be all that significant in terms of the overall health of Medicis’ business. So the market’s loss of confidence makes a lot more sense if it was triggered by worries over Solodyn than by the bookkeeping problem. Let’s look at the accounting first, and the Solodyn issue second:

In a statement that only an accountant could love, the company described its error — involving its “sales return reserve” — this way:

The Company’s prior accounting method, with respect to sales return reserves, accrued returns at replacement cost rather than deferring the gross sales price … the Company is in the process of revising its reserve calculations to defer the gross sales value of the returned product.

Everybody clear? Thought not. I’m not even going to pretend that I understand how to calculate the sales return reserve, but I can tell you that is to do with how the company prices goods that were shipped out and then returned to the company. And that price is determined in part by whether the company can repackage those goods and sell them as new, or whether, like fruit, the goods expire and must be written down completely.

Such a recalculation could potentially affect cost of goods sold, inventory, net accounts receivable and — the bottom line — net income. Curiously, the company said one piece of its books would not change, its cash flows:

The restatement is not expected to have an impact on the Company’s cash flows or Cash and Cash Equivalents balances for any of the affected periods.

So I went to the company’s web site to take a look at its cashflow statement for the last quarter and, interestingly enough, they didn’t publish one in their release. They just gave the income statement and the balance sheets. That just seems odd. But you can find the cashflow statement on the SEC’s website, here. It’s quite healthy — Medicis generates about $100 million in cash every six months.
By saying that it does not expect cashflow to change, the company seems to be indicating that the way it counts actual cash-on-hand is accurate; only the way it recognizes revenue and expenses per period will change.

But if you look at the cashflow statement, it contains lines for returns, accounts receivable and inventory — the very items you’d expect to be affected if you’re altering your returns numbers. Those expenses were $542,000, $10 million and $6 million, respectively. So I will be extremely interested to see how Medicis recalculates its returns without changing its cashflow statement. Note the returns are just $542,000, a small sum. One presumes that the accounting problem is some magnitude or factor of that. We’ll see.

So, did Medicis lose investor confidence based on a miscalculation of a budget line that’s only $542,000? Of course not.

The Wall Street Journal’s take on the matter gets to the real heart of Medicis’ problem - the potential nixing of its Solodyn patent by Impax, a challenger. It is not clear if or when the FDA will allow Impax to make a generic version of Solodyn, but the problem has been hanging over Medicis’ head since last January.

The issue came up in Medicis’ second quarter earnings call. CEO Jonah Shacknai’s responses were interesting. He started by saying:

We spend a great deal of time in our efforts strategizing around the SOLODYN franchise and predicting the timing to the best of our knowledge of the occurrences. There is not a clear picture of how the time line unfolds and there are many unknowns … We anticipate being on the market with follow-on forms of SOLODYN in this calendar year 2008. This time line is of course subject to FDA approval.

Lei Huang, an analyst at Summer Street, then asked whether the new line extensions of Solodyn would have patent protection. Shacknai replied:

I think we’ll see when we get there.

Huang: Okay. So it’s possible that you may have exclusivity on some of them?

Shacknai: Well, regulatory exclusivity no.

That’s it in a nutshell - Medicis’ key revenue driver is under threat, the company doesn’t know when that threat will arrive, and its plan for dealing with it may not work. And that’s not a good position to be in when your chief rival, Allergan, just acquired a competing product, Aczone.

The accounting issue just seems to have been the straw that broke the market’s back.