With Big Pharma's pipelines waning, biotech companies are finally getting their due--"fair-market value" for their compounds--said one CEO who has just inked two closely watched oncology deals.

George Scangos is president and CEO of Exelixis, a company making waves among analysts who cited its compounds as among the 

. Its cancer drugs hit multiple targets--with the potential of treating a broad swath of tumors.

While it's often impossible for analysts to judge what the going price for a compound should be, it is clear that the dynamic of pharma-biotech partnerships have certainly shifted in biotech's favor.

Genentech was the most recent company to bite, last week signing an initial $40 million deal to co-develop Exelixis' XL-518, an inhibitor of the MEK and other pathways. This is the second time Genentech has gone shopping in Exelixis' pipeline. And in December, Bristol-Myers Squibb inked a $120 million deal through which it can co-develop three Exelixis compounds of its choice.

Exelixis--which has also partnered with the likes of GlaxoSmithKline, Bayer, and Wyeth--does plan to market some of its compounds. Deciding which drugs to keep and which to offload depends on a formula of in-house strategy and outside opportunity, Scangos noted. But of late, opportunity certainly has come knocking.

These are heady days for a biotech start-up. Amid R&D pressures, big drug companies are practically clamoring outside the door, checkbooks in hand--their profits now as dependent on biotech's novel compounds as the biotechs once were dependent on pharma's deep pockets.

As if to drive home the point, Genentech's promising ovarian cancer drug Omnitarg (pertuzumab) faced a setback last week; the drug failed to delay disease progression in a Phase II trial--and its future is now up for review.

"For years compounds were underpriced," Scangos told investors. "Biotech companies were strapped for cash, and pharmaceutical companies were able to utilize that position to bring in compounds at bargain prices. Compounds are now approaching fair-market value."

Analysts have been hard-pressed to assign a fair-market value to recent biotech agreements--but they almost universally acknowledge that deal prices are escalating.

That trend is likely to accelerate. Biotechs will be able to forge full-steam ahead in commanding higher prices for riskier compounds at ever-earlier stages of development, according to Burrill and Company's 2007 Biotech Outlook, released last month. The Outlook also sees no M&A slowdown, particularly for biotechs with the most advanced pipelines. But the hottest deals might involve technology, even early-stage tech. (Merck's recent $1.1 billion acquisition of Sirna may be a taste of what's to come.)

Exelixis has excited all this attention because it boasts "probably the broadest [pipeline portfolio] to hit multiple pathways," said Elgar Peerschke, head of the global healthcare practice at Bain & Company. "It's not enough to block single pathways."

With larger deals under its belt, Exelixis has moved from licensing to "strategic collaboration," Scangos noted, adding that fast cash will be reinvested in other clinical programs. "The ultimate goal of our company is to develop and commercialize our own products."

Articles

Biotech companies, for years at the mercy of their deep-pocketed pharma partners, are finally holding the strings.

Revenge of the Nerds

AstraZeneca and Merck may be battling for dominance in the statin market, but the two heavy-hitters are now putting their heads (and wallets) together to explore the next evolution in heart disease.

The drug giants are teaming up to study biomarkers, the body's biological cues that could play a role in drug discovery and diagnostics.

Although it could be a decade or more before the hope lives up to the hype in this area, the AstraZeneca-Merck initiative highlights one example of the field's potential. Both already big players in the cholesterol market--Merck, which recently lost patent protection on Zocor (simvastatin), still co-promotes Vytorin (simavastatin/ezetimibe) with Schering/Plough, and AstraZeneca sells blockbuster Crestor (rosuvastatin)--the companies are trying to extend the life of their brands by looking beyond LDL. Working with biomarker specialists BG Medicine, health insurer Humana, and Royal Philips Electronics, the two big pharmas are trying to predict--and ultimately stave off--heart attacks.

Each of the companies have contributed about $5 million, for a total of $25 to 30 million. The drug makers will have "full and unrestricted rights" to commercialize any products that the findings yield, but are each working on separate pursuits.

"The real value for them is that it establishes a market for products that wouldn't otherwise be there," said Pieter Muntendam, president of BG.

The research might show, for example, that suppressing a biomarker like inflammation, one of the biggest risk factors for heart attacks, might be more successful in disease prevention than merely controlling high cholesterol. "We can't intervene early [in heart disease]--we can only identify high cholesterol," Muntendam said. "There's been a gradual increase in recognition that this is paradigm is favorable to the pharmaceutical industry [and] drug discovery."

The COX-2 market, while not part of this most recent partnership, might also benefit from biomarker research, Muntendam suggested. It's these subtle changes in cell proteins that differentiate a drug like Vioxx (rofecoxib), which had to be pulled from the market, from Celebrex (celecoxib), the only COX-2 inhibitor still standing. Currently, only large scale studies can show which drug is safest, but it might one day be possible to use animal models to test how these compounds act on specific biomarkers.

"Very often the surprises come in Phase III--or, worse, the adverse effects come about after the drug is on the market," said Muntendam, a proponent of a preclinical testing model that incorporates biomarkers.

Yet there have been some early disappointments. The Framingham Heart Study, for instance, failed to find any clinical benefit for using biomarkers to predict heart attacks--they were only marginally more successful than current screening methods that focus on blood pressure and LDL-levels.

"This is just a huge beast that everyone is looking at," said Greg Stone, media and communications director at Applied Data Research, a drug therapeutics consulting firm. "It's like antibodies 15 years ago--a lot of potential. The real issue relates to validation and identification. The complexity of the body and the genetic variance across the population make [application] difficult."

FDA and the National Institutes of Health have both expressed interest in working with industry to study biomarkers. But most corporate labs aren't set up to handle that sort of research. "It's going to be challenging and slow-going," Stone said.

Muntendam, too, acknowledged that pharma doesn't yet have the infrastructure in place to do large-scale biomarker studies. "The industry is still trying to get its arms around what it is, how to do it," he said. Nevertheless, he added, "There's a tremendous amount of low-hanging fruit, but the research hasn't been done."

Cardio competitors team up to find new ways of preventing heart attacks.

We 'Heart' Biomarkers, Say AstraZeneca and Merck

Eli Lilly settled the lion's share of its Zyprexa lawsuits last week following a barrage of exposes splashed prominently on the pages of The New York Times, complete with leaked court documents. Although Lilly denies that the 18,000 settlements were connected to the 

' coverage, the timing of the company's move emphasizes the delicate interplay between litigation and public relations.

Analysts have largely shrugged off the paper of record's series alleging that Lilly promoted Zyprexa (olanzapine) off-label and downplayed the risks of severe weight gain and diabetes. Most of these charges were years-old complaints that had already been incorporated into earnings--through lackluster sales and ongoing litigation.

But PR professionals acknowledged that there's no way that a company can escape multiple poundings on the front page of the 

 and not incur some casualties. Bad press can damage not only a company's stock price but its credibility with doctors, consumers, and patient advocacy groups, as the industry has seen with dispiriting frequency in recent years.

Lilly's response, for its part, has been fast and aggressive. Each of the four articles--which ran between December 17 and January 4--drew an immediate rebuttal in the form of a statement. The Indianapolis-based company, which owes about a quarter of its annual revenue to the blockbuster antipsychotic, also constructed a Web site, Zyprexafacts.com, which includes press releases, press contacts, and FAQs.

Lilly dismissed suggestions that the negative headlines played a role in the settlement, arguing that legal discussions have been ongoing since last summer. Furthermore, it stressed that it is largely protected from any new lawsuits that might result from the coverage, quoting Judge Jack Weinstein, who in settling the cases wrote, "The change in Zyprexa's label in September 2003, as ordered by the federal Food and Drug Administration, makes less viable, on statute of limitation grounds, such future cases."

Standard & Poor's seconded that sentiment, adding that the amount of the settlement is also encouraging. In July 2005, Lilly paid $700 million to settle 8,000 cases; this time, its bill amounts to less than $500 million for more than twice as many cases. About 1,200 cases still remain--with the first court date in April.

Cleaning up its legal mess soon after the 

 takedown should reflect well on Lilly--especially since mental health advocates and plaintiffs seemed satisfied with the outcome, noted Donna Cryer, an attorney who is CEO of PR firm CryerHealth and of counsel at Levick Strategic Communications. But she underlined the take-home message that companies need to be upfront about the risks of their drugs. "Lilly is not alone in having these problems--this is all just part of increased scrutiny on patient safety," she said. "It would be hard to find a case that better exemplifies all the themes and threads of healthcare today."

(And the Times' front-page pounding had nothing to do with it.)

Pharmaceutical Executive-01-10-2007

Revenge of the Nerds

We 'Heart' Biomarkers, Say AstraZeneca and Merck

Lilly Closes Zyprexa Case