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Anacor has signed a deal with Schering-Plough for a new topical anti-fungal product called AN2690. It is used to treat onychomycosis, a fungal infection of the nail and nail bed that affects about 10 percent of the U.S. population. Under terms of the deal Anacor will be paid $40 million upfront with an additional $10 million in financing from Schering-Plough. Schering-Plough will be responsible for all development costs with Anacor retaining the right to co-promote the drug in the US. Anacor will also receive double digit royalties if it does make it to the market. AN2690 is in phase II clinical trials.

PharmaLive: Anacor Signs Worldwide Exclusive License Agreement With Schering-Plough for AN2690, a New Topical Anti-Fungal Treatment :

What is interesting is the structure of AN2690 shown below.

Not many drugs have a boron atom in them and so it is very interesting. Anacor claims that this compound inhibits a validated drug target and works in a totally unique and unprecedented way.

One of the main problems with fungus of the nail bed is penetration to get at the infection deep down. Other treatments are oral medications and therefore work systemically. Also, Lamsil as well as Sporanox (itraconazole) capsules have had an FDA public health advisory issued warning physicians about adverse hepatic events and an association with congestive heart failure associated with both of these drugs. Definitely not something you want to risk for a simple thickened fingernail of toenail.

Topicals haven’t had a lot of success in this area so it will be interesting to see how this works. Anacor claims AN2690 penetrates 200 times better than the only other approved product. There is definitely interest in this since the market for onychomycosis is a $1.5 billion dollar market.

Anacor also has piblished some data on this compound.
Microbiological Activity Of AN2690, A New Antifungal Agent (pdf)

Other Resources
ANACOR SIGNS WORLDWIDE EXCLUSIVE LICENSE AGREEMENT WITH SCHERING-PLOUGH FOR AN2690, A NEW TOPICAL ANTI-FUNGAL TREATMENT
Schering-Plough Cites Today’s Anacor Agreement as Latest in Series of Deals
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Technorati Tags: AN2690, Anacor, pharmaceutical deals, anti-fungal, Schering-Plough

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Seems even the Japanese are getting into the mega-meger trend. Now Mitsubishi Pharma will merge with Tanabe Seiyaku in a deal worth $4 billion.

PharmaLive: Mitsubishi Pharma Corporation Reaches a Basic Agreement to Merge with Tanabe Seiyaku Co., Ltd. :

Will not large by worldwide standards, this will create Japans 5th largest pharmaceutical company. Just as in the US, there is great pressure to control drug prices and they hope is this merger will make them more competitive world-wide.

Other Resources
Joint Press Conference on the Merger of Tanabe Seiyaku, Co., Ltd. and Mitsubishi Pharma Corporation (pdf)

Technorati Tags: Mitsubishi Pharma, pharma M&A, pharmaceutical deals, Tanabe Seiyaku

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Forbes writer Matthew Herper has a great article outlining why he rationally thinks Bristol-Myers Squibb and Sanofi-Aventis should NOT merge.

Why Bristol And Sanofi Shouldn’t Merge - Forbes.com:

His article makes a lot of sense such as the difference in philosophy with Sanofi still hanging on to the blockbuster drug mentality and BMS being more focused. Also mentioned is that BMS has had a good relationship with the FDA and been able to get drugs approved whereas Sanofi has had their problems. All of this and more makes perfect sense. However, I don’t think sense plays into many mergers. I think that those in favor of mega-mergers have to much invested in making some kind of merger happen especially given the buyout options in some upper managements contracts. Then there is also egos with people who have initiated the deal being blinded to reality and wanted mergers to go through for personal reasons. Humans tend to have a reluctance to being able to walk away from deals that may not be the best. This is often referred to as “sunk-cost”. They have so much invested (usually emotionally )that it becomes impossible to accept facts. What facts are brought to light are brushed aside with justifications.

I think this will likely happen and may even be announced before the end of the year. However, I personally agree with Matthew Herper that it isn’t a good idea.

Technorati Tags: BMS, Bristol-Myers Squibb, pharma M&A, pharmaceutical deals, Sanofi, Sanofi-Aventis

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Although they have announced major layoffs, AstraZeneca is also in a buying mode having said they will pay $150 million for Arrow Therapeutics a privately owned biotech that focuses on anit-virals.

AstraZeneca to buy Arrow Therapeutics - Yahoo! Finance:

Arrows most advanced product is a phase II compound known as RSV604 which targets Respiratory Syncytial Virus which primarily affects infants and those who are immune-compromised. What is interesting is Arrow signed a deal with Novartis for development of this compound back in the summer of 2005 so evidently AstraZeneca is likely more interested in their other earlier stage products. At least in this case, they are acquiring the company to concentrate their efforts on a given therapeutic area rather than just to add any old drug to the pipeline.

Two thoughts come to mind in regard to this story. First, I think companies need to have a focus and concentrate their efforts on certain therapeutic areas where they have expertise. The days of having a vast array of widely differing therapeutics I think are gone.

Second, especially for anti-infectives, I think many smaller companies working in this area will become prime targets for larger pharma. As bacteria become more resistant to commonly used drugs, there will be a growing need for new antibiotics. Also, many big pharma companies have gotten rid of their anti-infectives groups and the expertise seems to me to be more concentrated in smaller up and coming companies. Once it gets to the point were anti-infectives are seen as profitable again, you will see more acquisitions of this sort. However, I don’t see the markets reaching the point anytime soon.

Other Resources
AstraZeneca Acquires Arrow Therapeutics To Broaden Anti-Infective Capabilities (press release)

Technorati Tags: antibiotics, AstraZeneca, Arrow Therapeutics

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More job cuts for pharmaceutical companies came across my desk this morning.

PharmaLive: Ligand Announces Corporate Restructuring

Ligand is laying off 276 people or 76% of its work force and closing down its UK subsidiary. Many high level executives are stepping down including the Chief Financial Officer, Chief Scientific Officer, General Counsel and the heads of human resources, operations, regulatory affairs and project management!! The VPs of Research and Development will stay on.

AstraZeneca axes 3,000 jobs worldwide - Yahoo! News

AstraZeneca to Slash Jobs Despite Growth: Financial News - Yahoo! Finance

AstraZeneca has announced the elimination of 3,000 jobs or 5% of it workforce over the next three years. No more details but this year will indeed be a year of upheaval for large pharmaceutical companies.

I think this was to be expected, given the number of mergers in past years. There seems to be a pendulum that swings back and forth between merging and downsizing. The interesting thing now though is that both are occurring at the same time! So maybe a pendulum isn’t the best analogy and it is really more like The Whip carnival ride where things are rotating upon multiple axis’s at once.

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One of the big topics recently has been the deals that some large pharmaceutical companies have struck with smaller generic firms to keep the generics off the market.

Senate bill aims to end deals that slow generics - Yahoo! News:

The article talks about the Senate plans to ban the deals made between brand name pharmaceutical companies and potential generic makers. This allows the brand name to continue making large profits and sometimes the generic maker makes more money in the short run than they would have made otherwise.

Here is a quote from Partick Leahy (D-VT)

“Congress never intended brand-name drug companies to be able to pay off generic companies not to produce generic medicines,” Leahy said at a Judiciary Committee hearing. “That would be a shame, harmful to consumers, and a crime.”

What is interesting is the increase in the number of such deals. In 2005 there were seven such deals; in 2006 that doubled to 14. Also recent court rulings such as an appeals court in Atlanta brought by the FTC about Schering-Plough illegally keeping a generic version of its K-Dur off the market were ruled against the FTC and for the pharmaceutical company. The US Supreme Court declined to take up the case. Another lower court also threw out a similar case involving Tamoxifen from AstaZeneca.

What is interesting is that some companies in the generics industry have come out against it also. The chairman of Barr Labs, Bruce Downey said the proposed bill;

will discourage vigorous challenges of patents because generic companies will lack the flexibility to settle some cases once they are filed.”

“The proposed bill therefore would undermine the incentives Congress has carefully created to promote generic competition,” Downey said.

I don’t know that I agree with that statement. His statement, to me, implies that sometimes the generic drug companies may really not have a case but it is a way to make the big pharma company pay them even if the generic company might not have a solid case. I think the purpose of the government incentives was to manufacture cheaper generic drugs, not to make money off of big pharma from stifling of competition.

PharmaLive: FTC Provides Senate Testimony on Anticompetitive Patent Settlements in the U.S. Pharmaceutical Industry :

The Pharmalive article covers the recent testomony of Federal Trade Commissioner Federal Trade Commissioner Jon Leibowitz . He said that the recent court rulings I mentioned above have made it more difficult for the FTC to proceed with antitrust cases in order to stop exclusion payments.

The Pharmagossip blog also recently had a posting on this topic.

PharmaGossip: Big Pharma payoffs to Generics companies - “somewhere between bribery and extortion”:

This posting is actually part of an editorial recently in the Star Ledger and can be found here. Given the number of really big drugs coming of patent in the next 4-5 years this practice is sure to get more lucrative for the generic drug makers and occur more frequently. It will be interesting to see if this gets through Congress and even then it will almost certainly face a presidential veto. This will be a interesting topic to cover in the coming months.

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Since I reported previously about the merger between Genetech and Tanox I thought I’d follow up about the FTC requesting more information.

SignOnSanDiego.com > News > Business — FTC asks for more info on Genentech, Tanox merger:

Not much new here and no specifics but it will push the finalization of the deal off by a few months.

Disclosure: I own a few shares of Genetech stock.

Technorati Tags: Genentech, pharma M&A, pharmaceutical deals, Tanox

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The New York times is reporting that Bristol-Myers Squibb and Sanofi-Aventis may be in merger talks!! If this happened, it would make the new company the second largest pharmaceutical company behind Pfizer

Rumors Fly About Bristol, Lifting Stock - New York Times:

My take is that if both companies are vehemently denying it then there are good chances it is true. Then again, it could be rumors started by folks taking advantage of the market to make money in the stock. Both companies have had a lot of activity and BMS is actually up on the possibility. Also news that some top management at BMS have announced agreements that would allow them to walk away with significant compensation if certain triggers happen including demotions, transfers or cuts in pay. While these are sometimes put in place to keep managers who would otherwise leave during times of turmoil, they are also often put into place just before major mergers.

The market has been anticipating some sort of merger or take-over of BMS since they have failed to name a new CEO and only have an interim one. I don’t like to speculate but it does seem likely given all the indications. Also, remember that Sanofi and BMS have a partnership on Plavix which may be seeing generic competition soon. All of these point towards a merger in my opinion. I don’t believe it will necessarily be for the best in the long run but it is hard to convince those involved that that may be the case. They have too much to gain by pushing such mergers to completion.

Technorati Tags: Bristol-Myers Squibb, pharma M&A, pharmaceutical deals, Sanofi-Aventis

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The recent Contract Pharma article about the Outlook 2007 from Tufts for contract manufacturers paints a fairly rosy view.

Contract Services: Outlook 2007

According to the article, companies are figuring out what they are best at and outsourcing the rest. A lot of this is due to the very lean human resources at many companies these days. It is an interesting read and I recommend anyone interested in outsourcing in the pharmaceutical industry.

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This recent article from Economist.com is a good read about the current state of the pharmaceutical industry from a financial point of view.

Pharmaceuticals | Billion dollar pills | Economist.com

The article talks about many points I’ve made here before and even talks about bringing together scientists in one center and focusing on just a few therapeutic areas. It is an interesting read although think it still falls short of outlining what needs to be changed in the pharmaceutical industry.

One of the premises of the article is that the pharmaceutical industry tries to do it all and does many things in-house. The authors suggest more out-sourcing (although that terms is not used) and to concentrate on just a few strengths. The author uses the term “disaggreagted”. While this may work to some extent, I don’t think it will ever be as prevalent as say the automobile industry. While I do believe there are things the pharmaceutical industry can learn from other industries about how to become more efficient, I think you need to be careful and closely scrutinize the ideas before trying to apply them to pharmaceuticals. All ideas that work in other industry may not be applicable to pharmaceuticals.

One of the major problems from my perspective is still the blockbuster drug mentality. All of the things outlined in the article are still geared towards finding the billion dollar a year drug. This mentality is what has brought on the current situation for big pharma and will continue to be a major issue in the next 4-5 years. By this, I mean anytime the bulk of a company’s revenues are from one or two products, they are in a precarious situation. It would be much better in my view to have three or four $500 million products rather than a single $1 billion. They have basically put all the eggs into one basket. Too many times, projects that have good possibility are not pursued because they don’t meet this arbitrary mark of a billion dollar a year in sales. I would much rather have a company with four or five products generating hundreds of millions of dollars in sales that expire intermittently over many years than one product with a billion dollar a year in sales that expires in a few years.

Here are the top 20 pharmaceuticals companies and the percentage of pharmaceutical revenues generated by their top two selling drugs according to 2005 data. This data is generated from the Top 20 Pharmaceutical Companies article published last year in Contract Pharma.

Pfizer 38% from Lipitor and Norvasc
Sanofi-Aventis 18% from Plavix and Lovenox (increases to 25% if you include Taxotere, its third best selling drug)
GlaxoSmithKline 23% from Advair and Avendia
AstraZeneca 31% from Nexium and Seroquel
Merck 35% from Zocor and Fosamax
Novarits 29% from Diovan and Gleevec
Hoffman-La Roche 31% from Rituxan and Epogin
Bristol-Myers Squibb 40% from Plavix and Pravachol
Wyeth 36% from Effexor and Protonix
Eli Lilly 40% from Zyprexa and Gemzar
Abbott Labs 20% from Humira and Mobic
Boehringer-Ingelheim 25% from Spiriva and Mobic
Takeda Pharmaceuticals 40% from Actos and Prevacid
Scheringer-Plough 24% from Vytorin and Remicade
Astellas Pharma 28% from Prograf and Harnal (increases to 39% if you include Lipitor its third best selling drug)
Daiichi-Sankyo figures not available
Novo Nordisk 66% from insulin and insulin related analogs
Eisai 51% from Aricept and Aciphex
Bayer 27% from Ascensia and Kogenate

As you can see it ranges from a low of 18% for Sanofi-Aventis to a high of 66% for Novo Nordisk. The Novo Nordisk may be an unfair number since they lump insulin products and insulin analogs as their top two drugs and these are really aggreagates. However, the point is that for all the top pharmaceuticals, a large portion of their revenues are generated from only a few products.

Many of these either have patents expiring or have had bad press recently which combined with the decreasing number of potential products will likely lead to a desperate situation for the foreseeable future..

Technorati Tags: pharma pipelines, pharma stats, pharma worldwide markets

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