Pfizer announced on Thursday its decision to discontinue sales of its new inhaled insulin drug Exubera.

Exubera was developed by San Carlos-based Nektar Therapeutics, which licensed the drug to Pfizer.   According to the Philadelphia Business Journal, Pfizer plans to transfer the rights to Exubera back to Nektar Therapeutics and take a “$2.8 billion charge to dispose of its interests in it.”

The Philadelphia Business Journal reported:

Pfizer at one time said Exubera, approved about two years ago by the Food and Drug Administration, would be a $2 billion-a-year drug, but it was slow in rolling out the marketing of the drug and its device, which was criticized by doctors and insulin users as being too bulky.

So what happened to cause Pfizer to pull the plug on Exubera?

The San Jose Mercury News reported on the background to this decision as follows:

Because 21 million Americans have diabetes and many of them dislike injecting insulin, Exubera – the first-ever inhaled insulin system for adults – was widely expected to be a blockbuster. . . . But despite a recently launched TV ad blitz by Pfizer, the product has been a major disappointment. Although Pfizer has been vague about overall sales, the company revealed that Exubera’s revenue for the second quarter of this year was a mere $4 million. Some people attribute Exubera’s dismal sales to the fact that it is more expensive and complicated to use than injectable insulin. Figuring out the proper dose of Exubera also is somewhat different than with injectable insulin. And because Exubera can hinder lung function in some cases, anyone using it is supposed to get a lung test first. In addition, some doctors complain that a daily dose of Exubera costs at least twice as much as the injectable variety and that some insurance companies won’t pay for it.  But others fault Pfizer for not manufacturing it quickly enough, trying to market it initially with an ill-prepared sales team and delaying its ad campaign until this summer.

The Wall Street Journal Online reported on Pfizer’s decision as follows:

Drug companies often cancel drugs during human trials, and occasionally after they go on the market if there are any red flags about safety. But to pull a new drug from the market because it didn’t sell — in the absence of a red flag — is almost unprecedented.

“This is one of the most stunning failures in the history of the pharmaceutical industry,” said Mike Krensavage, an analyst at Raymond James & Associates. “I hope it would give Pfizer pause about buying any more assets.”

Pharma Marketing Blog took the analysis of Pfizer’s decision one step further and compared the failure of Exubera to the sinking of the Titantic:

There are plenty of . . . similarities between Exubera’s failure and the failure of the “unsinkable” Titanic. I am specifically talking about Pfizer’s hubris and marketing’s poisoned Kool Aid. Like the builders of the Titanic, the Exubera marketers felt they had an “unsinkable” product that would quickly reach blockbuster status and make the company a bundle.

It is unclear to date as to the exact terms and conditions of the Nektar Therapeutics license agreement, but the Wall Street Journal Online described Pfizer’s action as a “termination” of the license agreement for a definitive price, and The Mercury News reported that Nektar Therapeutics will have the ability to sell and market the Exubera itself on an ongoing basis.  Thus, there is reason to believe that Pfizer’s decision constituted the termination of an exclusive licensing agreement, and that the parties had previously agreed in writing to the specific damage amount to be paid to Nektar Therapeutics in the event of termination.

Apparently, however, Nektar Therapeutics is still recovering from the shock it received yesterday with Pfizer’s announcement, and has yet to announce its future plans for the drug.  The Wall Street Journal Online reported:

The news that Pfizer was abandoning Exubera came as a surprise to Nektar of San Carlos, Calif., from which Pfizer licensed Exubera. Nektar issued a scathing news release late yesterday accusing its partner of a poor marketing job and of not alerting Nektar it would be terminating their licensing deal. Pfizer says it told Nektar of its plans minutes after releasing the news, because the announcement was material for both companies.

The Wall Street Journal Online points out that, even if Nektar Therapeutics does try to move forward with the commercialization of Exubera, questions remain as to the safety and overall viability of inhaled insulin products:

[T]he market for other inhaled-insulin products still in development [is up in the air]. Part of Exubera’s problem — the safety concerns that come with inhaling a drug — will be hard to surmount for any product that goes into the lungs, in the absence of long-term data. There is also the question of whether patients want to inhale insulin, or are really resistant to needles.  In the 11 years since Pfizer bought into the idea, insulin pens have made injecting the drug less painful than the traditional needle and syringe.

The Exubera debacle shines a spotlight on the role of the medical community in determining whether a novel technology is a success or a failure.  While there is no doubt that a variety of factors contributed to the product’s failure, clearly Pfizer did not focus adequately on addressing the concerns of the medical community in its attempt to bring Exubera to market.  Too many lingering questions about the product and its delivery system remain, and my suspicion is that the conservative medical community urged patients to stick with the tried and true products rather than to give Exubera a try.  In all likelihood, the fact that the product was more expensive than the other options on the market was just the icing on the cake.

Health Advocacy and Medical Specialty Groups Submitted a letter to Congress today arguing for Congress to rethink its position on SBIR eligibility in its upcoming consideration of the reauthorization of the Small Business Innovation Research ("SBIR") program.

As we previously reported in Congress to Consider SBIR Funding Increase , the SBIR program is set to expire in 2008, and Congress is currently considering legislation that would increase the amount that federal agencies with large research and development budgets would have to set aside for SBIR funding. 

The letter sent to Congress today articulated the position of biotech companies that the SBIR eligibility rules should be amended to reinstate funding for majority venture capital-backed companies:

After twenty years of participating in the program, the Small Business Administration (SBA) ruled in 2003 that small companies that are majority venture capital-backed could no longer apply for grants regardless of how few employees the companies have.  Because of the unique capital needs of biotechnology companies, most are now ineligible to be compete for grants.  As a result of the reinterpretation, the SBIR applicant pool is shrinking at the National Institutes of Health ("NIH)," and work on live-saving and life-enhancing technology is being postponed. . . .

Small biotechnology companies take basic scientific discoveries,  many of which originate from universities, and conduct further research and development to turn discoveries into commerically available treatments and cures. This collaborative relationship is one of the ways universities and academic researchers serve the public by contributing to the development of new treatments and cures and supporting the local economy.  Small biotechnology companies require significant venture capital investment, and unfortunately the SBA reinterpretation of the eligibility rules has hampered the continued research and development into biotechnology products, thereby delaying the delivery of future treatments to patients.

Fifty-two organizations signed the letter to Congress, including the Christopher & Dana Reeve Foundation, the Michael J. Fox Foundation for Parkison’s Research, and the Leukemia & Lymphoma Society.

The recent opinion of the Federal Circuit in In re Seagate Technology (Fed. Cir. Docket No. 830; 8/20/07) imposed new limits on willful infringement by establishing a new standard: proof of willful infringement permitting enhanced damages now requires at least a showing of objective recklessness. 

This new standard overruled the prior standard set out in Underwater Devices Inc. v. Morrison-Knudsen, Co., 717 F.2d 1380 (Fed. Cir. 1983), which was that when a potential infringer has notice of another’s rights, he has an affirmative duty to exercise due care to determine whether or not he is infringing.

The Federal Circuit’s opinion addressed three key issues:

1. Should a party’s assertion of the advice of counsel defense to willful infringement extend waiver of the attorney-client privilege to communications with that party’s trial counsel?  See In re EchoStar Commc’n Corp., 448 F.3d 1294 (Fed. Cir. 2006).
2. What is the effect of any such waiver on work-product immunity?
3. Given the impact of the statutory duty of care standard announced in Underwater Devices on the issue of waiver of attorney-client privilege, should this court reconsider the decision in Underwater Devices and the duty of care standard itself?

On the first issue, the Federal Circuit held that "as a general proposition, asserting the advice of counsel defense and disclosing opinions of opinion counsel do not constitute a waiver of the attorney-client privilege for communications with trial counsel."  However, the Federal Circuit declined to set out an absolute rule.

On the second issue, the Federal Circuit held that "an advice of counsel defense asserted to refute a charge of willful infringement" does not extend to trial counsel’s work product, absent exceptional circumstances.

On the third issue, the Federal Circuit overruled the standard announed in Underwater Devices, holding that "proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness."  The Court abandoned the affirmative duty of due care, and reemphasized that there is no affirmative duty to obtain an opinion of counsel.

 Peter Zura’s 271 Patent Blog provided a good summary of Federal Circuit opinion, as did the Patent Baristas, who also provided some additional background information on the issue, such as the Underwater Devices decision and the freedom-to-practice opinions.

So what is the significance of the opinion?

The Patent Baristas reported on the significance as follows:

The Federal Circuit has demonstrated once again that it is not afraid to effect a sea change in patent law jurisprudence in a big way. . . .

[I]t appears that Seagate signals a receding of the tide of willful infringement litigation. The decision appears to be intended by the court to make a willfulness case substantially more difficult to prove. In view of the complexity and high reversal rate on claim construction issues in patent infringement cases, how can it be argued in any but the simplest and clearest of cases (is there such a thing?) that an accused infringer knew or should have known of a strong case before litigation and adjudication? This would seem to require proof that the infringer was omniscient. Whether this logical conundrum was intended by the court or not, the effect will be to remove risk for accused infringers and shift some of the burden back to patent owners.

Clearly, the Federal Circuit used this case to impose new limits on the ability to obtain willful damages in patent infringement .  Is this a case of judicial legislating?  Or is it just  a case of the Federal Circuit correcting a prior misreading of the precedent?   

The fact that the Federal Circuit issued the opinion to coincide with the consideration of patent reform legislation in the House, which has also contemplated imposing limits on willful infringement damages, certainly is an indication that the Federal Circuit could have been influenced by the political debate going on in Congress. On the other hand, perhaps the Federal Circuit really did believe that the relevant precedent had been incorrectly decided, and that this alone prompted the Court to overturn the precedent. 

Somehow I am not quite convinced.  Are you? 

Biogenerics legislation will likely be tabled until 2008, reported the Kaiser Daily Health Policy Report.

According to the Kaiser Daily Health Policy Report:

Rep. Henry Waxman (D-Calif.) in a speech before the Generic Pharmaceutical Association on Thursday said legislation (HR 1038) that would allow FDA to approve generic versions of biotechnology drugs is unlikely to reach the House floor this year. . . .

Waxman said that although “enormous strides” have been made since he introduced the measure in February, scheduling issues would prevent the bill from being included in House legislation (HR 2900) that would overhaul FDA and reauthorize prescription drug user fees. Waxman tried to attach the generic biotech measure to the FDA overhaul bill in July but was unsuccessful.

The biotech industry can breathe a sigh of relief.  With the battle over patent reform legislation looming ahead this fall, biogenerics is one fight that the industry will not have to take on this year.

The House passed its Patent Reform Bill on Friday with a 220-175 vote, reported the San Jose Mercury News.

According to the Mercury News, the passage of the Bill was in part due to a push by Democratic leaders, including Speaker Nancy Pelosi.  Sixty Republicans also supported the Bill, including Republicans in districts with large concentrations of high tech companies such as California, Virginia, and Texas.  The Senate plans to take up a similar bill this fall.

The passage of this Bill in the House is viewed as a victory for the high technology industry, but that victory comes at the expense of the biotech industry, which has not supported patent reform.

Ephraim Schwartz of InfoWorld reported on the differing views of the two industries last week:

One of the significant changes in the [Patent Reform] Act addresses the apportionment of damages clause. . . .

Because the high tech industry is built on thousands of small patents while the pharmaceutical industry typically would have one or two patents that covers years of research, pharmaceutical companies would like to see awards kept high to discourage patent infringement while high tech companies hope that by limiting damages it will also limit the huge number of so-called nuisance suits these large companies receive year in and year out.

Jim Greenwood, the President and CEO of the Biotechnology Industry Organzation (“BIO”), issued a press release on behalf of the organization expressing disappointment with the House vote.  The text of that press release stated as follows:

BIO appreciates the continued efforts by the House to improve the Patent Reform Act, but unfortunately cannot support the legislation passed today as it threatens continued biotechnological innovation.  We welcome improvements to the U.S. patent system, particularly those that increase patent quality, increase public participation, and provide additional resources to the Patent and Trademark Office (PTO).  However, the legislation that passed the House today and the legislation currently pending in the Senate do far more harm than good to our nation’s patent system.

While we are disappointed that the legislation passed the House, we were heartened that it did so narrowly and that there was strong bipartisan opposition to the bill.  This opposition demonstrates the serious concern of varied stakeholders — across many industries, research institutions and other interests — with the bill and the need for a more consensus-oriented approach to patent law reform.We look forward to working with the Senate to improve upon this legislation, particularly with respect to provisions relating to damages, inequitable conduct reform, post-grant review proceedings and PTO rulemaking authority.”

There is no word yet as to the official reactions to the House vote by our California biotech industry organizations, BIOCOM and Bay Bio, but their reactions are likely to be very similar to those of their national counterpart.

What will happen with patent reform when the Senate takes up its bill this fall?  We are likely heading for some heated debate.   The California Biotech Law Blog will keep you posted on the developments.

Dow Jones Marketwatch Reporter John Letzing recently interviewed me regarding patent holding companies and the subject of patent reform generally.  While the interviews focus more on the high tech industry than the biotech industry, I think that my blog readers will want to read the articles, as  John did an excellent job in addressing the issues.

Speculator of Mundane Patents Casts a Long Shadow

Lawmakers Take Aim at Patent Speculators

Congress is set to consider an increase to SBIR funding, according to a recent report by Mass High Tech: The Journal of New England Technology.

Sen. Evan Bayh, D-Ind., introduced the legislation, which would increase from 2.5 to 5% by 2013 the amount that federal agencies with large research and development budgets would have to set aside for SBIR funding.

Mass High Tech: The Journal of New England Technology reported on the significance of the SBIR program as follows:

The SBIR program — which doled out $1.9 billion nationwide in 2005 — is a major source of federal funding for early-stage technology development in the United States. The grants are used to explore the feasibility of technologies sought by government agencies, including the U.S. Department of Energy and the U.S. Department of Defense.

Supporters of the SBIR budget increase include biotechnology executives who argue that the funding fills the gap left by declining venture capital investment in the early-stage firms.

Of course, the article points out that the debate on the legislation will likely focus on the role of venture capital firms, since companies majority-owned by large venture-capital backed firms do not qualify for SBIR awards.

The SBIR program is currently set to expire in 2008.

Read the rest of this entry »

The Food and Drug Administration ("FDA") is exercising new caution in approving drugs in the wake of the Merck Vioxx scandal, according to an Associated Press Report published on MSNBC.com.

The Associated Press Report stated as follows: 

The agency has approved 61 percent of drug applications through mid-August, down from 73 percent in the same period last year, according to BioMedTracker, a biotech and pharmaceutical research service. . . .

James Kumpel at Friedman, Billings, Ramsey & Co. just published a report showing FDA approvals of "new molecular entities" — drugs made from new chemical compounds rather then just twists on existing drugs — so far this year are at their lowest level in at least a decade. Only seven were approved through the end of July, versus an average of 12 over the first seven months of each year since 1998.

What are some of the specific examples cited by the article of the FDA’s caution?

• Rejection of Merck’s Arcoxia, a successor to Vioxx;
• Asking for more time to review its approved migraine drug Frova for a new use, preventing menstrual migraines;
• Rejecting or delaying for approval Novartis’ diabetes drug Galvus, Sanofi-Aventis’ weight-loss drug Zimulti, and a higher dose of GlaxoSmithKline’s Advair Diskus for bronchitis and emphysema symptoms; and
• Rejecting Wyeth’s experimental schizophrenia drug bifeprunox and Wyeth’s Pristiq, which would have been the first nonhormonal drug for menopause symptoms.

It was almost inevitable that the FDA would tighten up its practices and exercise more caution in approving drugs following all the bad publicity over the Vioxx scandal.  In some ways, this was perhaps warranted.  However, the question now is: are they taking caution too far?  Are they delaying good medicines from going to market that could be saving lives, in the exercise of extreme caution?  Only time will tell, and I am sure many in the biotech industry will be closely watching.

The San Francisco Chronicle ran an interesting article last week on the steps that the biotech industry is taking to protect itself against the threat of generic copies, as patents run out and the threat of biogenerics legislation looms ahead.

The Chronicle reported on the issue as follows:

Whether many biotech companies will be able to beat the generic threat through innovation is an open question. But many will try. . . .

Traditional pharmaceutical companies, whose pills and tablets have been vulnerable to generic competition since 1984, have struggled to roll out significantly improved medicines before patents expired. Revenues for drugs such as the antidepressant Zoloft and the sleeping pill Ambien are plunging as generic sales rise.

“It remains to be seen if the same thing will happen in biotech,” Citigroup analyst Yaron Werber said. Some of the signs for biotech are favorable. “The industry continues to be a leader in innovation,” he said. That capacity for innovation is a significant added business risk for generic manufacturers who venture into the biotech realm, Werber said.

So what is the industry doing to prepare?

According to the Chronicle, Genentech is putting brand-names of its drugs on the market to compete with the drugs that are about to lose protection, and is also putting next-generation versions of its own drugs on the market.

In contrast, the Chronicle reported that other companies are racing to develop improved generic versions of the brand name drug.  The Chronicle stated as follows:

Two Bay Area companies, Affymax Inc. of Palo Alto and FibroGen Inc. of South San Francisco, are among the manufacturers working on next-generation drugs they hope will capture market share from Epogen and similar branded drugs. Affymax’s experimental compound Hematide requires less-frequent dosing. Theoretically, it could help patients avoid a very rare side effect associated with Epogen-like drugs.

All in all, the Chronicle put a positive spin on the issue, emphasizing that the industry was not concerned, arguing that the threat of biogenerics and the impending loss of patent protection just encouraged the industry to move forward with the development of more innovations.

Is this media spin or an accurate reflection of the mood of the industry?  My guess is that it is a little of both.  Smart industry players have to think ahead on how they will survive if biogenerics legislation becomes a reality, but one cannot help but question whether they are really as unconcerned as the Chronicle suggests.

Rebecca Zacks in XConomy provided an excellent overview of a blogosphere controversy that erupted last week over biogenerics legislation, in response to an article run by the Wall Street Journal on Genzyme’s recent difficulties in manufacturing the drug Myozyme at a second plant.

Zacks provided some background to the issue:

Myozyme, approved by the FDA last year for the treatment of an inherited muscle disorder called Pompe disease, could be a big source of revenue for Genzyme—the drug can cost more than $300,000 per year for an adult patient, according to the Journal article. But Genzyme has been unable to scale up production of the drug because the FDA has so far declined to approve a Boston plant meant to be its main source. While the company waits for that approval, it is providing some U.S. patients with free doses from a different plant in Framingham, MA—the one that produced the drug for the clinical trials—on an experimental basis. (The Framingham product is already approved for sale in other countries, but not the U.S.)

What’s stalling approval of the new factory, according the article, is a chemical difference between the Myozyme produced in Framingham and that produced in Boston.

Zack cited Wall Street Journal’s David Armstrong, who followed up on the Journal’s article with the following explanation:

Genzyme is having trouble persuading the FDA to sign off on Myozyme made in big batches. The agency wants to be sure the drug produced in large tanks is the same as the stuff Genzyme made successfully on a smaller scale.

Making biologics is complicated work, and that’s one reason the biotech industry has voiced caution about legislation to allow generic versions of the medicines.

In the case of Myozyme, billions of cells from hamster ovaries growing in large stainless steel tanks produce the enzyme Pompe patients lack. The fact that Genzyme, which has loads of biotech experience, is having such difficulty ramping up production of its own drug heightens worries about the ability of generic manufacturers to accurately copy brand-name biotech drugs.

Even small differences in these drugs could affect patients. Myozyme made in the big tanks contains less of a key carbohydrate that is believed to help certain muscle cells absorb the drug. Less absorption could reduce the drug’s effectiveness.

However, Zacks acknowledged that not all the bloggers give any real credence to the biotech’s industry’s position or to the argument that Myozeme should be a case study for why biogenerics legislation is a bad idea, citing Venture Beat’s David Hamilton, who had his own take on the controversy, arguing that the Wall Street Journal “missed a much more important point about biogenerics: [t]he double standard that the biotech industry holds” on determining the equivalence of different batches of drugs.  Hamilton wrote as follows:

The first issue here is that there’s nothing new about biotechs finding that new production batches of a complicated protein differ in certain ways from older batches. . . . Sometimes these differences are serious; more often, they’re not. . . .

The second issue — and those of you who’ve followed these debates can probably see where I’m going — is that the biotech industry wants to have it both ways when it comes to the “complicated work” of making biologics. Where biogenerics are concerned, the industry insists that copycat versions of biotech drugs must undergo those expensive and lengthy clinical trials in the interests of “patient safety.” When it comes to their own drugs, however, biotech companies are perfectly willing to rely on a battery of simpler tests to ensure that a new production batch is equivalent to an old one, and only run clinical trials as a last resort (and when forced to by the FDA).

All of which suggests that it would probably suffice to subject any would-be copycat drug to the same set of tests that biotech manufacturers themselves must meet for a new production facility. If it passes, it’s approved. If not, then it’s time to consider clinical trials. In fact, this is pretty much the “case-by-case” strategy adopted by the House and Senate biogenerics bills — ones that I’m pretty sure the Biotechnology Industry Organization opposed. In any event, it doesn’t seem too much to ask that journalists covering these debates realize that the case against biogenerics is a lot weaker than the industry would like us to think.

All in all, Zacks effectively captured a very interesting blogosphere debate on yet another aspect of the biogenerics controversy.  As you know if you follow this blog, I have indicated repeatedly in prior blogposts my view that biogenerics legislation is going to have a negative impact on the biotech industry.  I think I would agree with Venture Beat that this is the principal problem with biogenerics legislation, and that the argument that biogenerics legislation will somehow lead to dangerous copies of drugs being on the market is a fairly weak attempt at scaring the public and/or legislators into voting against such legislation.  There is already a mechanism in place to regulate drugs on the market–the FDA regulatory powers.  The much larger issue is what biogenerics legislation will do to discourage biotech innovations that should be a concern to all of us out there.  We all want to be able to afford to buy the drugs we need, but at the same time, we also want access to medications that will make us well when we come down with a horrible illness.  We should not lose sight that without a profit incentive to developing those medications, they won’t be available when we need them.