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vol. 34 ❚ no. 10

Market Access Right product, right patient, tight price, tighter reimbursement

Value Frameworks Price Transparency Real-World Evidence Outcomes-Based Reimbursement

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©2016 Informa Business Information, Inc., an Informa company November 2016 | In Vivo

CONTENTS ❚invivo.pharm

amedtechbi.comNovember 2016

In VivoPharma intelligence |

1 0 States Fight For Drug Price Transparency Ed SilvErman

California’s Proposition 61 and a number of other state-led measures to control drug prices failed to gain traction in 2016. But states are likely to remain a battleground in the war against costs in a pharma-friendly Trump administration.

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Is The UK Still Open For Medtech Innovation Reimbursement?aShlEy yEo

Confusing and ineffective channels of innovation adoption and a lack of funding hamper the UK’s reputation as one of the world’s health care capitals and a driver of care excellence – in spite of its global brands, NICE, MHRA and the NHS itself. But changes that should transform market access are in place and are worthy of close attention in the next two to three years.

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US Outcomes-Based Contracts: Big Uptick In Interest, But Not ExecutionCathy KElly

The promise of outcomes-based contracts for biopharmaceuticals has yet to be realized in the US. Although precise numbers are hard to come by, payers and manufacturers agree the field is still nascent. However, they don’t seem to be giving up on the idea.

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Curative Regenerative Medicines: Preparing Health Care Systems For The Coming WaveFaraz ali, tEd SloComb and

miChaEl WErnEr

We may be at the dawn of a new era of curative regenerative therapies, but their very nature may create barriers to adoption. The Alliance for Regenerative Medicine frames the opportunities and challenges for the industry, arguing that policy makers must begin to understand the ways that these therapies represent value for money.

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Real-World Evidence And The Quest For European Market AccessFranCESCa bruCE

Real-world evidence promises to solve many problems inherent in getting a drug to patients at a good price. It could slash development costs and help make the reimbursement case to payers. But there are challenges for companies that want to exploit real-world evidence to get their drug to patients in Europe.

T h e m a r k e T a cc e ss i ss u e

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In Vivo | November 2016 invivo.pharmamedtechbi.com

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In VivoPharma intelligence | November 2016

The long US presidential campaign concluded with the election of Donald Trump in a con-test that unexpectedly went to the wire. The health care industry could see some dramatic changes during the next four years, but un-certainty about what is to come has been bal-anced with optimism that some of Trump’s proposed reforms will be good for business.

Those who expect the furor over steep drug prices hikes to die down will probably be disappointed. Trump may well be more pharma-friendly than Clinton would have been, but there is still bipartisan support for

price control measures. And Trump voters may be among the most vocal in demanding fair access to the medicines they need.

Even though federal initiatives to control drug prices are less likely un-der Trump than Clinton, individual US states are not likely to abandon their own legislative efforts despite the defeat of California’s Prop 61 at the ballot box. That’s just one of the stories we cover in this special mar-ket access issue. Within these pages we also explore value frameworks for determining optimal drug pricing, including regenerative medicines that may cure with a single dose; early movers who are defining the terms for outcomes-based contracts between pharmas and payers; the challenges of using real-world evidence to support European product launches; and initiatives in the UK – like the US, reeling somewhat from an implausible national vote result in 2016 – designed to counter the innovation-stifling effects of pricing and reimbursement pressures.

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❚ From The Editor

d E pa rT m E N T S

around The indusTry 4 Drug Pricing: With “Value”

Debate In Full Swing, ICER’s Influence Grows MElANIE SENIoR

7 Should We Be Alarmed By Prescription Drug Cost Growth? JoSHUA CoHEN

8 In Vivo’s Deals of The Month: october 2016 NANCY DVoRIN

38 on The moveSignificant recent job changes in pharma, medtech and diagnostics REGINA PAlESKI

42 dealmakingDeals Shaping The Medical Industry, october 2016 THE STRATEGIC TRANSACTIoNS TEAM

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E x C lu S i v E O N l i N E CO N T E N T

❚ Biopharma Quarterly dealmaking statistics, Q3 2016 maureen riordan and amanda micklus

❚ deals in depth September 2016 amanda micklus

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❚ What Pharma can do about Brexit: views From The c-suite John rounTree

❚ Where do life science Business models come From? Brian smiTh

❚ The Future of specialty drug Pricing nancy dvorin

NaNCy dvOriN

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Drug Pricing: With “Value” Debate In Full Swing, ICER’s Influence GrowsThe Institute for Clinical and Economic Review has invited feedback on its methodology for calculating a drug’s recommended price range. Industry response has been critical, but pharma can no longer afford to merely oppose value frameworks. It needs to create strategies for a world in which such frameworks are a permanent and influential part of the pricing and reimbursement landscape.

“We are not out to strangle the indus-try,” insisted Steven Pearson, president and founder of ICER (the Institute for Clini-cal and Economic Review), during an inter-view in late 2015. “We’re just out to create a framework for having a dialogue around drug price and value,” he continued.

One year on, and that dialogue is certainly in full swing in the US. Industry might well be in the line of fire, but ICER’s not the only one shooting. ICER reviews the cost-effectiveness and affordability of high-profile new drugs, and has indeed concluded that many of them are priced well above what might be considered value-for-money. But a series of mas-sive drug price hikes from companies like Turing Pharmaceuticals AG, Vale-ant Pharmaceuticals International Inc. and Mylan NV has also put drug pricing front and center in an already heated US political climate. Failed Presidential candidate Hillary Clinton proposed a se-ries of measures to curb excessive price increases and supports Medicare’s right to negotiate prices. (Also see "Clinton's Drug Price Plan: Threat Or Flash In The Political Pan?" – Pink Sheet, September 2, 2016.) California unsuccessfully bal-lotted its citizens as to whether the state government should have the right to pay no more for drugs than the Department of Veterans Affairs, typically the lowest price watermark in the US. While many believe the Trump Administration will be more pharma-friendly, it's too soon to tell. As Novartis AG’s CEO Joe Jimenez recently conceded to the UK Financial Times, “No matter which candidate wins, we will see a more difficult pricing envi-

ronment in the US” after the election.Organizations such as ICER, a non-

profit group with no statutory authority at all, are adding fuel to the fire. Manufactur-ers including Amgen Inc., Bristol-Myers Squibb Co. and Roche are stinging from ICER’s reports that their drugs are too pricey – even as much as 80% too pricey. Payers don’t have to act on them, though some are delighted to have more justifica-tion for aggressive contracting positions and stricter coverage restrictions (that could happen with or without ICER). But there’s mixed evidence, as yet, that ICER’s recommended price ranges are influenc-ing actual prices achieved. (Also see "ICER Eyes QALY Ratios, Budget Impacts In Meth-ods Review" – Pink Sheet, July 28, 2016.) “We’re still early in the cycle of payers using this information concretely to de-sign payment mechanisms for drugs. It’s still pilots and things,” admitted Pearson.

More worrisome, however, is the influ-ence ICER reports could have on the Centers for Medicare and Medicaid Services (CMS). That agency’s proposal to change the way it pays for Part B drugs (that is, drugs ad-ministered by medical providers) includes a suggestion for using value frameworks to help them determine the price paid. (Also see "Part B Demo Could Save $2.2 Bil., CBO Says; Blocking It Would Cost Less" – Pink Sheet, October 6, 2016.) And the CMS pro-posal specifically mentions ICER’s reports as potential models.

ICER’s methodologies are still evolv-ing. The organization recently invited feedback from all stakeholders, including pharma and patient advocacy groups, on the processes it uses to calculate a drug’s

recommended price range. Not many other countries’ drug cost-watchdogs – many of which have been in place a lot longer – have offered industry the opportunity to influence how drugs are assessed.

ICER’s Value Assessment Framework currently comprises two measures: Care Value, which is a measure of a drug’s com-parative clinical effectiveness and cost-effectiveness, and Health System Value, a measure of the five-year budget impact on health systems. Both together lead to a “value-based price benchmark” – the price at which patients could be treated for reasonable long-term value, without crippling the system short term.

No ShoRTAGE oF CRITICSIndustry responded to ICER’s call with a range of criticisms. They included: too much focus on drug costs as the main determinant of health system value; the use of list prices, not actual prices paid, to determine costs; inappropriate use of the budget impact measure; inappropriate use of the quality-adjusted life year (QALY) to measure drugs’ cost-effectiveness; overestimates of drug uptake rates; and (from Amgen and BMS, among others) a lack of transparency in the models.

Pharmaceutical companies aren’t the only critics. A long list of big and small patient advocacy groups, including the International Myeloma Foundation, the Global Liver Institute, the National Alli-ance on Mental Health and CancerCare, have also attacked the ICER methodol-ogy. Like drug companies, the patient groups complained about ICER’s focus on costs – particularly short-term costs – but also that its methodology doesn’t reflect the concerns of patients. And while ICER claims it does listen to – and its reports reflect – such concerns, the groups themselves argue that there’s too little transparency to the process.

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In part the problem is format: ICER reports are long and detailed – and the easiest point to grasp is what often ends up as the headline of articles reviewing the reports: ICER’s suggested value-based price benchmarks. The report formats don’t make it easy to compare, head-to-head, the various therapies on all the key efficacy, safety, convenience and economic elements. Nor does the analy-sis clearly show how the opinions of the groups whose expertise and points of view ICER solicits – like patient advocates – are reflected in the final analysis.

And in part the problem is that an ICER report is not a true database, one in which users can review the same set of facts and increase or decrease their relative importance to more clearly reflect the con-cerns of different stakeholders. Indeed, this ability to differentially “weight” the various decision-making elements is one of the key attributes of Memorial Sloan Kettering Cancer Center’s (MSKCC’s) DrugAbacus system and the technology behind it. (See sidebar, “DrugAbacus Gains Money, Sophistication.”)

Setting aside the accusation of lack of transparency (not least given the opacity surrounding how pharma sets prices to begin with), most of those points will be addressed in the revised methodology, ac-cording to Pearson. In particular, he prom-ised “substantial changes around how we calculate [a drug’s] budget impact.” Budget impact attracted a wide range of opinions in the feedback. Some want it restricted to drug costs, not total health care costs; one or two want it to include shorter-term calculations; many more want it to include longer-term calculations; and several drug firms would rather scrap it all together as a component of Health System Value, since, as stated in Amgen’s feedback, “It is not a measure of value.”

“We’ll figure out a way to message aspects of the budget impact potential so they’re not overly focused on price,” said Pearson. Instead, he continued, they’ll look at whether the budgetary hit will be significant enough to justify more focus on patient prioritization, for example, delay-ing access for some patients.

That’s not likely to go down well with everyone either. Nor will Pearson’s as-sertion that the QALY, a controversial measure of value used most prominently

at the UK’s National Institute of Care and Health Excellence (NICE), will remain the “anchor” of ICER’s cost-effectiveness cal-culation. Many drug firms, including the industry associations BIO and PhRMA, will continue to kick and scream about that.

They may be consoled, though, by ICER’s proposing to move away from using list prices as the basis for calculating costs and thereby value-based benchmarks. List prices don’t reflect the real prices paid for drugs, given (often significant) rebates and discounts negotiated in the marketplace – including by Medicare and Medicaid. “We will do something different … around pricing,” promised Pearson.

ICER’s revised approach, due to appear in December 2016, will invite a second round of public comment.

All measures of value are complex, and

involve a certain amount of judgment, as well as sophisticated health economic modeling tools. That’s clear not just from the depth and breadth of discussion and commentary around ICER’s work, but also from the characteristics and limitations of other value-based pricing tools that have emerged over the last year or two. (Also see "Scoring Value: New Tools Chal-lenge Pharma's US Pricing Bonanza" – In Vivo, October 21, 2015.) These include DrugAbacus, conceived by Peter Bach, MD, director of the Center for Health Policy and Outcomes at MSKCC, the Value Framework, established by the American Society of Clinical Oncologists (ASCO); and the National Comprehensive Cancer Network’s Evidence Blocks, upgraded to include cost and affordability in clinical practice guidelines.

❚ DRUgAbAcUS gAINS MONEY, SOpHISTIcATION

In February 2016, the non-profit Laura and John Arnold Foundation donated $7.2 million to fund value-based pricing solutions. Of the total donated, $4.7 million went to Memorial Sloan Kettering Cancer Center’s Evidence Driven Drug Pricing Project, home of the DrugAbacus, conceived and designed by Peter Bach, MD (the bulk of the remaining Arnold Foundation money went to a similar project at the Center for Evidence-based Policy at oregon health & Science University).

DrugAbacus’ technology, developed by Westport, CT-based Real Endpoints (an Informa partner) and based on its RxScorecard value-assessment tool, allows users to determine and compare value-based prices for more than 50 cancer drugs based on their own weightings of eight key value elements – including the “price” of a year of life and the relative importance of a drug’s novelty and cost of development. It also includes two further dimensions of drug pricing: pricing by indica-tion, and by geography or market. Users can compare the actual and Abacus price of four widely used drugs – Abraxane, Avastin, Nexavar and Tarceva – across multiple indications for which they’re approved. They can also compare actual and Abacus prices across different countries and markets. The added functionality is designed to prompt further reflection of what variables are, and should be, reflected in drug prices.

Most patient advocacy groups and pharmaceutical companies haven’t embraced DrugAbacus any more than they’ve accepted ICER’s assess-ments. For example, the number of “price components” DrugAbacus uses is limited and unvariable. But advocacy groups, like some drug companies, do like DrugAbacus’ ability to differentially weight the various “price components” – and thus at least avoid the problem that the ASCO, NCCN and ICER frameworks all end up providing: a single, undifferentiated answer to the question of value. IV004958

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These tools aren’t perfect, or com-prehensive. They’re all limited to cancer drugs, for starters; ASCO’s framework, primarily for clinicians, only scores drugs that have been compared in head-to-head trials. But their existence, and the discussions around them, have provided a helpful level of debate – beyond catchy newspaper headlines and outraged tweets – around the factors that should influence drug pricing.

PRICING ToolS ARE hERE To STAyValue-based pricing tools won’t go away. Existing versions are being sharpened. Several payers and a fast-increasing number of drug companies have been working with the RxScorecard, a web-based, interactive value-assessment tool from Real Endpoints, which provided the technological backbone and some of the research behind DrugAbacus. (Editor’s note: Real Endpoints has partnered with In Vivo’s parent company Informa.) Based on the concept of multi-criteria decision analysis, RxScorecard establishes a flex-ible set of weighted value-elements for each disease category and then transpar-ently scores each element based on pub-licly available data. Each element’s weight can be varied based on how the user sees its relative importance – and those differ-

ential weightings will change the relative value scores (e.g., a patient group might weight a particular aspect of convenience more heavily than a payer or a physician group, which might preferentially weight one of the efficacy elements).

And new value frameworks are in the works: consultancy Avalere Health and medical research accelerator FasterCures are developing a value tool that primarily represents the patient perspective. The Patient Perspective Value Framework will be published in June 2017. (Also see "As Drug Value Frameworks Gain Traction, Patients Seek More Input" – Pink Sheet, September 28, 2016.)

Meantime, ICER’s influence will con-tinue to spread, even if the CMS proposal around Part B drugs never materializes. Clinton’s proto-administration has been on the phone a few times, too, noted Pearson. Meanwhile, NICE, considered by many as a global benchmark in cost-effectiveness assessment, recently re-leased proposals to include budget impact in its drug reviews too; something it hasn’t done to date.

All of ICER’s drug assessment work is funded by non-profit, objective sources, and will continue to be, insisted Pearson. ICER was turbo-charged in 2015 by funding from the Laura and John Arnold Founda-tion; it’s currently in its second year of the

two-year donation. Given the waves that ICER is making, it’s unlikely to find itself short of financial contributors, though. “We still intend to grow,” said Pearson.

Indeed, value frameworks are here to stay. The key for biopharmaceutical companies is to figure out how to use them. A number of drug firms have begun to employ them to vet their own pipeline agents, internally exploiting the outside assessment tools to objectively measure their relative value against marketed and competitive pipeline therapies or to un-cover subpopulations in which their agent has a significant therapeutic advantage. Other companies are looking to expand the focus of value frameworks from the one-size-fits-all approach to a methodol-ogy that allows different responses based on the needs of the different custom-ers – patients, providers, payers (and indeed the different flavors of each of those groups).

What is eminently clear, however, is that drug firms can no longer afford to merely oppose value frameworks. They have to create strategies for a world in which they are a permanent and influen-tial part of the pricing and reimbursement landscape. IV004957

MElANIE [email protected]

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Should We Be Alarmed By Prescription Drug Cost Growth?

Policy analysts and media pundits alike assign much of the blame regarding recent in-creases in health care costs to prescription drugs. On one hand, they are correct to point to prescription drugs as an important driver of health care cost growth in recent years.

Although the percentage of spending on outpatient drugs has remained steady at around 10% for the last decade, special-ty drugs used in hospitals and physician’s offices have accounted for significant growth in drug expenditures, bringing the total share up to about 17%. In 2014, for the first time in well over a decade we saw double-digit growth in drug expenditures.

On the other hand, drug spending over-all is still a relatively small portion of the health care pie. As such, concerns stem-ming from increasing prescription drug cost growth may be somewhat misplaced. Even at the height of its spike in 2014 the increase in per capita drug spending constituted only around 2% of total health care spending per enrollee in public and private insurance plans.

Broadly, growth in health care spending is driven by:

•�Anagingpopulationexercisinggreaterdemand for health care (hospital,physician,outpatient,nursinghome)services

•�Higherpricesforhealthcareservicesdemanded

•�Newdiagnosticandtherapeutictech-nologies, includingnewly approveddrugs

Together, hospital and physician expenditures account for three times the spending on drugs. And, despite the recent uptick in the rate of drug cost growth, over the past 10 years the pace of hospital and physician expenditures has generally exceeded prescription drugs. (See Exhibit 1.)

Apparently, these facts do not make for eye-catching headlines. By contrast, the recent surge in the price of newly approved drugs targeting hepatitis C, HIV and vari-ous cancer and orphan diseases is salient and the focus of media attention. A case in

point is the recently reported 50-fold price increase of Turing Pharmaceuticals AG’s Daraprim (pyrimethamine), which drew the ire of politicians, policymakers and patient advocates. Several other drugs have gained notoriety, including recent revelations regarding steep price hikes of

Mylan NV’s EpiPen (epinephrine).Analysts often point to international

comparisons of health care spending with the US ranked first, attributing differences to the relatively high costs of prescrip-tion drugs in the US. Indeed, per capita spending on health care in the US was $9,086 in 2013, two-and-a-half times the Organization for Economic Cooperation and Development median for 13 high-income countries.

The relatively high price of branded drugs is one of several contributing fac-tors. Other factors include physician sala-ries, which are two to four times the OECD average, the costs of surgical procedures

and diagnostics that are up to four times the average, and the price per day for hos-pital stays that is five times the average.

In the next decade health care spend-ing is projected to grow at an average rate of 5.8% per year, according to the Centers for Medicare and Medicaid Services. In addition, the health care share of the gross domestic product is expected to rise from its current 17.5% to 20.1% by 2025. This increase will be driven by hospital

inpatient and outpatient services, physi-cian and clinical services and prescription drugs (average annual growth of 4.9%, 5.4% and 6.2%, respectively, for the 2016–2025 period).

Because hospital and physician ser-vices constitute greater shares of total health care spending, 32% and 22%, respectively, and in the next 10 years are expected to grow at an annual pace com-parable to prescription drugs, they will continue to be more impactful drivers of US health care cost growth. In fact, PwC estimates that over this period hospital and physician service expenditures are predicted to increase by more than four

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Physician and Clinical Services

Outpatient

Hospital InpatientPrescription Drug

2015201420132012201120102009200820072006

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Exhibit 1

health Care Sector Annual Growth Rates (2006–2015)

SourceS: Adapted from chappel A, Sheingold S, Nguyen N, ASPe Issue Brief, “Health care spending growth and federal policy,” March 22, 2016; catlin A, cowan c, centers for Medicare and Medicaid Services, November 19, 2005, “History of health spending in the united States, 1960–2013”

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times the cumulative projected rise in prescription drug spending.

Singling out prescription drugs as the most egregious of the cost sinners in spite of their relatively small role raises the ques-tion of why so much attention is paid in the media and peer-reviewed journals to the cost of prescription drugs. Perhaps this is because prescription drugs are salient in ways that physician and hospital services are not. Nevertheless, analysts and poli-cymakers should avoid adopting a myopic silo mentality. They should evaluate the value and budgetary impact of health care services across all sectors (e.g., use of expensive equipment such as robotic surgery systems and positron emission tomography scans, expensive procedures such as cesarean sections, routine annual health care exams and new specialty drugs for cancer or infectious diseases.)

It is important, therefore, to examine the bigger picture, and not limit the focus of cost containment to prescription drugs. A better way moving forward is for policy-makers to adopt a holistic approach aimed at measuring value of each health service, diagnostic or therapeutic. Clinical- and cost-effectiveness is a useful proxy for value in that it informs decision makers how much health benefit is likely to be produced by different uses of resources. But other factors should be considered, too, including severity of illness targeted by a drug or health service. Policymakers should also resist the temptation to view the various sectors as silos that do not in-teract with one another. In some instanc-es, pharmaceuticals may result in a shift-ing of costs – more in pharmaceuticals, less in other sectors (e.g., cardiovascular, peptic ulcer, HIV/AIDS, hepatitis C and

certain diabetes and cancer medications). In other therapeutic categories drugs will add to cost growth without displacing costs in other sectors. In conclusion, policymakers need to examine the value of all health services, including prescription drugs, through comprehensive clinical- and cost-effectiveness analyses, as well as budget impact studies. IV004960

JoShUA [email protected]

Joshua Cohen, PhD ([email protected]) is Research Associate Professor at Tufts Center for the Study of Drug Develop-ment. His areas of expertise include pre-scription drug pricing and reimbursement policy, patient access to biopharmaceuti-cals, comparative effectiveness research and prescription-to-OTC switching.

In Vivo’s editors pick October’s top M&A, alliance, financing and deals.

❚� Deals of the MoNth

TOp M&A: Pfizer Sells hospira Infusion Systems To ICU Medical Pfizer Inc. sold its hospira Infusion Sys-tems business to ICU Medical Inc. for $1 billion: $400 million in stock and $600 million in cash. hospira Inc.’s biosimilars business was apparently the key draw when Pfizer acquired the company in February 2015 for $15.4 billion in cash and $1.75 billion in debt. With Hospira’s portfolio of IV sets, the LifeShield line of IV safety devices, infusion pumps, and solutions, ICU Medical becomes a lead-ing pure-play infusion therapy company with estimated combined revenues of $1.45 billion. Post-transaction, Pfizer will hold a 16.6% stake in ICU Medical

TOp AllIANcE: AZ Drops AssetsAstraZeneca PlC completed five out-licensing deals cumulatively worth more than $1 billion, continuing its year-long purge of non-core assets. It granted Allergan PlC exclusive global rights to develop and sell MEDI2070, an interleukin-23 monoclonal antibody in Phase IIb for Crohn’s disease; it gave 3SBio Inc. exclusive Chinese marketing rights to its diabetes products Byetta and Bydureon and it licensed Insmed Inc. exclusive global rights to the dipeptidyl peptidase 1 inhibitor AZD7986, which Insmed will develop for non-cystic fibrosis bronchiectasis. Aralez Pharmaceuticals Inc. obtained exclusive US rights to AZ’s beta blocker Toprol-XL and its authorized generic. And ex-US rights to the allergy nasal spray Rhinocort Aqua went to Johnson & Johnson’s Cilag GMBh International.

TOp FINANcINg: Stealthy Carrick Raises $95 Million Personalized cancer drug developer Car-rick Therapeutics ltd. raised $95 million in a Series A round led by Arch Venture Partners and Woodford Investment Man-agement. Cambridge Enterprise Seed Funds, Cambridge Innovation Capital, GV (Google Ventures), Lightstone Ventures and Carrick’s strategic partner Evotec AG joined. Carrick was formed in Janu-ary 2015 as Navillus Therapeutics, but is emerging from stealth with a new name and what it describes as a “cutting edge R&D engine” to identify promising can-didates for treating aggressive cancers. CEO Elaine Sullivan, PhD, was VP of R&D at both Eli Lilly and AstraZeneca.

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om❚ DRUG PRICING

As Californians prepared to vote last month on a contentious ballot measure designed to lower drug prices, a shirt-sleeved Bernie Sanders appeared at a Los Angeles rally in hopes of ensuring that Proposition 61 would pass.

Speaking to an enthusiastic crowd, he got straight to the point. “It looks like the people of California are prepared to put an end to the greed of

the pharmaceutical industry,” he bellowed to raucous applause. “They understand that a victory here in California will not only lower prescription drug prices here, it will impact every state in the country.”

Not as many were prepared to act as he hoped, however. Also known as the California Drug Price Relief Act, the ballot measure was an unex-

pected bust. Although polls showed residents supported the plan, nearly 54% of voters rejected the proposition. This came after months of a bruising campaign in which the chief executives of drug companies were labeled as criminals and the pharmaceutical industry amassed a $109 million war chest for an ad campaign.

All this underscored how much was at stake and how the states will likely remain a battleground in the war over pharmaceutical costs, especially now that Donald Trump has been elected as the next US president.

Proposition 61 was seen as a litmus test for a national debate over rising prescription drug costs. Anxiety has been rising in the US, where prices for new medicines used to combat such hard-to-treat diseases as hepatitis C and various forms of cancer are set higher all the time. Some companies buy old drugs and jack up prices to sky-high levels. And even prices for some generics are climbing to new heights.

These trends have taken a toll. Pharmaceutical costs became a talking point in the 2016 presidential election and social media is regularly flooded with consumer gripes. A recent Kaiser Family Foundation poll found that reducing costs should be the biggest priority for the next president and Congress when it comes to lowering overall health

States Fight For Drug Price Transparency

California’s Proposition 61 and a number of other state-led measures to control drug prices failed to gain traction in 2016. But states are likely to remain a battleground in the war against costs in a pharma-friendly Trump administration.

The pharma industry mounted a tough and ultimately successful campaign against California’s measure to control drug prices.

Even though Proposition 61 was one of many such initiatives to fail in 2016, states are unlikely to be deterred by their lack of success to date in requiring price concessions from drug manufacturers.

They may in fact be more motivated given the recent election results. Pharma could interpret November’s Republican victories as a potential end to federal intervention in drug pricing strategies.

But any drugmaker that believes the political overhaul in Washington is the proverbial green light to do business as usual may want to think twice. Drug affordability is going to remain a key issue.

by Ed SilvErman

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NEW JERSEYHawaii

HawaiiN.Dakota Hawaii

S.Dakota

Nebraska

LOUISIANA

Washington

NEW HAMPSHIRE

Connecticut

Indiana

Indiana

Maine

Maine

Idaho

Arkansas

UTAHRhode Island

Rhode IslandMontana

Nebraska

NEBRASKA

ArizonaWyoming

W Y O M I N G

TEXAS

Texas

Oregon

Alaska

Virginia

Virginia

VIRGINIAOklahoma

NEW MEXICO

MISSOURI

Nevada

AlabamaFlorida

Virginia

Virginia

West Virginia

Kentucky

Kentucky

MinnesotaILLINOIS

CALIFORNIAOHIO

MASSACHUSETTS

COLORADO

PENNSYLVANIA

VERMONTNEW YORK

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costs, and 63% want the government to take action.

“The people are speaking up, because they have had enough,” says Walid Gellad, MD, an associate professor of medicine and health policy and co-director of the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh.

Some government officials are adding their voices. At the BioPharma Congress in Washington DC in November, Andy Slavitt, the acting administrator for the Centers for Medicare and Medicaid Services, had nothing nice to say about drug companies. In fact, he compared a growing number of them to Turing Pharmaceuticals AG, the company once run by Martin Shkreli, which bought an older life-saving medicine and overnight boosted the price by about 5,000%.

“You know, last year when I spoke here, the price increases at Turing were making news, and I told you I didn’t want this industry to be defined by its worst actors,” he said. “I defended the industry then, but the more data that’s revealed, the more bad actors you find, and I’m telling you now: it’s too many.”

Slavitt also tossed out some sobering figures. Total prescription drug spending in 2015 was about $457 billion, or 16.7% of health care spending. And based on recent trends, he noted that CMS is pro-jecting average annual increases of 6.7% through 2025. (See box.)a Flawed measureIt was against such a backdrop that the AIDS Healthcare Foundation, a non-profit that runs pharmacies and clinics nationwide, spearheaded Proposition 61. A controversial organization, AHF has for years publicly challenged and chastised drugmakers over the prices charged for HIV and, more recently, hepatitis C medicines. But the ballot measure was its most audacious move yet.

Under the plan, state agencies would have been required to pay no more for medicines than the US Department of Veteran Affairs, which receives a federally mandated 24% discount from drugmak-ers. The plan was to lower drug costs for up to 7 million Californians who get pre-scription drug coverage through various agencies, including low-income residents on the state version of Medicaid.

But the measure was flawed. It was unclear whether the California Medic-aid program, which is called Medi-Cal, could get all needed medicines at a lower price. Moreover, drugmakers could have balked at offering the same discount for a medicine that was given to the VA. This would put Medi-Cal in a bind, since the state agency is still mandated by federal law to provide the drug to beneficiaries.

The VA also negotiates added rebates for some drugs, but those extra rebates, which are paid to the VA, are not always disclosed under confidentiality agree-ments. Companies might instead have opted to raise prices for other residents to make up for any losses incurred sell-ing to Medi-Cal. Drugmakers might also have raised prices to the VA or refused to sell certain medicines rather than accept lower payments.

“There could have been a waterfall effect,” said Richard Evans, an analyst at Sector & Sovereign Research. “If more states passed these measures, the best path forward for the manufacturer would be to inflate its price to the VA, and they will do that. So when the smoke clears, state prices will be back where they were originally and the VA will be paying more, too.”

For these reasons, the California Leg-islative Analyst’s Office issued a report that was decidedly lukewarm. The report stated that the “fiscal impact of this mea-sure on the state is unknown. It could range from relatively little effect to signifi-cant annual savings.” However, the office conceded that lowering drug spending by even a few percent would yield savings in the high tens of millions annually.

Pharma Fights backAll of these caveats made it rather easy for the pharmaceutical industry to push back. Company after company donated money to the campaign, which used the $109 million raised to hire consultants who fashioned a steady stream of billboards, bus tours, rallies and television ads. The drumbeat of warnings in those messages also convinced nearly every consequen-tial newspaper in the state to editorialize against Prop 61, although a few practically held their nose as they did so.

“Prop 61 is just a bumper sticker selling change. It lacks thoughtful policies that would help with patient access issues,

and might well make things worse,” said Peter Staley, a high-profile AIDS activist and Founder of Treatment AIDS Group, in one of dozens of press statements issued by the No on 61 group that was created by the pharmaceutical industry to defeat the measure.

Both sides, meanwhile, also released vitriolic statements that sought to scan-dalize the other, offering details about their opponents secretly backing various organizations that were issuing public statements for or against the measure. In short, the battle over Prop 61 was an old-fashioned, mud-slinging event and made for an extremely interesting campaign.

Of course, it was closely watched not only because it was the first such state ballot measure to be placed before voters, but also because it played out in Califor-nia. As one of the largest and typically most progressive states in the US, Cali-fornia is regularly seen as a bellwether for political trends. And this was the key reason that the pharmaceutical industry marshaled its resources.

But by placing the measure directly before voters, AHF was also trying a dif-

❚ The MaTh On Drug COsTs

• Total prescription drug spending in 2015 was $457 billion, 16.7% of total health care spending

• Average annual spending in-creases of 6.7% are projected through 2025

• Medicare B spending doubled 2007–2015

• Medicare D spending increased 8.4% 2013–2015

• Specialty drugs accounted for 31.8% of spending but only 1% of total prescriptions

• Top 20 drugs with highest per unit increase in Medicaid include seven generics with increases ranging from 140% to nearly 500% 2014–2015

SOURCE: Andy Slavitt, BioPharma Congress, November 3, 2016

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ferent tactic than had been tried by leg-islators in California and 10 other states around the country. In those locales, lawmakers introduced bills that would either require drugmakers to explain their price increases or disclose many of their costs in hopes the transparency would eventually pressure companies to limit their pricing. (See Exhibit 1, and for greater detail on these state initiatives see online-only sidebar, “State Drug Cost/Price Transparency Legislation.)

All but one of these gambits failed. A bill was enacted in Vermont, but whether it actually leads to lower or stabilized prices remains to be seen. Elsewhere, the pharmaceutical industry succeeded in slapping aside each and every effort. A legislative aide in California complained that, during an assembly committee hear-ing last August, a bill that was making notable progress was suddenly “gutted.”

Despite the setbacks, some state law-makers intend to push ahead. The Ohio Drug Price Relief Act is set to appear on the ballot in November 2017. Virtually identical to California’s Proposition 61, it is also backed by the AIDS Healthcare Foundation. (See box.)

And earlier this year, Joann Ginal, a Colorado lawmaker and Democrat who represents Fort Collins, a small city of about 160,000 people located roughly 65 miles north of Denver, introduced a bill to require each drugmaker to provide a one-time report to the state about any medicine priced at or above $50,000 for a treatment course or per year.

Her bipartisan bill died last March, al-though she hopes to start anew in January.

“I have to keep trying,” she says. “I need to look at how I can approach this problem in a different fashion. I still think this is one of the biggest concerns and something has to be proposed.” But she admits she is uncertain which path to pursue, given that her own effort flopped and Prop 61 does not appear to be a winning model.

Federal Action Less Likely Nonetheless, such conviction reflects on-going concern that Washington will not take action. The Obama administration proposed a program to lower costs for the Medicare Part B program, which pays for injectable and infused drugs for the el-derly. The move is designed to lower drug spending by reducing reimbursement fees for doctors, but the pharmaceutical industry has so far delayed its start.

In September, a bipartisan group of lawmakers introduced legislation that was largely modeled after the state bills. Known as the Fair Drug Pricing Act, it would require drugmakers to justify their pricing and provide a breakdown of their costs before raising prices on certain products by more than 10%.

Co-sponsored by US Senator John Mc-Cain (R-AZ) and US Representative Jan Schakowsky (D-IL), the bill would also require drugmakers to notify the US De-partment of Health and Human Services – and submit a justification report – 30 days before they increase the price of certain medicines by more than 10%.

The reports will also require companies to provide manufacturing and R&D costs for those drugs, as well as net profits asso-ciated with the drugs, and marketing and advertising spending on the drugs. The lawmakers noted the bill will not prohibit drugmakers from increasing prices, but is supposed to give taxpayers notice of price increases and “bring basic transparency to the market for prescription drugs.”

Whether this will gain any traction is uncertain, at best, though.

Now that Donald Trump will be moving into the White House and the Repub-licans will control both congressional chambers – the House and the Senate – the pharmaceutical industry is betting that the lurch toward price controls ex-pected under a Hillary Clinton presidency is less likely to happen.

This explains the initial burst of inves-

tor enthusiasm immediately after the presidential election. After lingering in a months-long funk, drug and biotech stocks rocketed upwards on November 9. Of course, Trump remains a wild card and has previously voiced a willingness to combat high drug prices, possibly by allowing Medicare to negotiate with drugmakers or allow importation. But he has not offered a specific plan.

One reason the industry had been con-fident is because Rich Bagger, a former pharmaceutical executive, was on the Trump transition team. A former Pfizer vice president and chief of staff to New Jersey governor Chris Christie, he took a leave of absence from Celgene, where he was executive vice president for corpo-rate affairs and market access, to work for Trump.

“He’s got a deep understanding of, and a long history with, the brand-name industry,” says James Shehan, senior counsel and head of the FDA regulatory practice at the Lowenstein Sandler law firm, who was once general counsel at Novo Nordisk. “And if he ends up in any kind of policy position, you’d expect that relationship to continue. I think he’s prob-ably going to take the industry view on pricing.” Bagger, however, was recently sidelined along with Christie following vice president-elect Mike Pence’s ascen-sion to the top of the transition team. This robs the industry of a key ally, underscor-ing the uncertainty drugmakers face.

Crossing BordersEven so, state legislators may encounter just as much, if not more, frustration with Washington than during the Obama years. And as Colorado’s Ginal indicated, state lawmakers may increasingly look to swap ideas across borders.

❚ OhiO Drug PriCe relief aCT

Like failed California Prop 61 before it, Ohio’s Drug Price Re-lief Act requires state agencies to pay no more for prescription drugs than the US Department of Veterans Affairs, a discount of up to 40%. The measure will be on the ballot in November 2017.

State Drug Cost/Price Legislation,2015-2016

A review of recent initiatives to require cost or price

transparency by prescription drug manufacturers.

http://bit.ly/2fEBUqc

reaD MOre Online

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STATE LEgiSLATiON STATUS

California Proposition 61: The California Drug Price Relief initiative 11/8/2016 – Defeated on the California ballot

CA A 463: Pharmaceutical Cost Transparency Act of 2015 2/01/2016 – Failed

CA S 1010: Health Care: Prescription Drug Costs 8/24/2016 – Failed – adjourned

Colorado CO H 1102: Drug Production Costs Transparency 3/19/2016 – Postponed indefinitely

Massachusetts MA S 1048: Transparency and Cost Control of Pharmaceutical Drug

6/02/2016 – From Joint Committee on Health Care Financing; pending, but inactive study to end of 2016 session

Minnesota MN S 934 and MN H 10603/23/2015 – Referred to Senate Committee on Finance Carryover, Senate Committee on Finance

New York NY S 7686: Prescription Drug Cost Transparency Pending, Senate Committee on Health

NY A 8265: Pharmaceutical Cost Transparency Act of 2015 6/16/2015 – To Assembly Committee on Health, pending

North Carolina NC H 839: Pharmaceutical Drugs Cost Reporting 4/15/2015 – To House Committee on Health, pending

Oregon OR H 3486: Manufacturer of Prescription Drug 7/06/2015 – in committee upon adjournment

Pennsylvania PA H 2029: Prescription Drug Program Pending, House Committee on Health

Rhode island Ri H 7839 and Ri S 2560: Critical Prescription Drug List 4/26/2016 – in House Committee on Corporations, pending

Vermont VT S 216: Prescription Drugs 6/03/2016 – Signed by Governor

Virginia VA S 487: Prescription Drug Price Transparency 2/4/16 – in Senate Committee on Education and Health; Continued to 2017.

VA H 1113: Prescription Drug Price Transparency 1/13/2016 – To House Committee on Commerce and Labor, pending

Washington WA S 6471: Transparency of Prescription Drug Pricing and Costs

3/10/2016 – 2016 1st special session: by order of resolution reintroduced and retained in present status

SOURCE: National Conference Of State Legislatures

Exhibit 1Little Success To Date For State Drug Price Transparency Legislation

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“State legislatures can have a strong sense of independence when it comes to new laws,” says Richard Cauchi, health program director for health insurance, financing and pharmaceuticals at the National Conference of State Legisla-tures. “However, they also can pay atten-tion to up-and-coming ideas that become law in other states.”

There have already been signs of move-ment in that direction. Last October, the National Academy for State Health Policy – a working group of state legislative staffers, Medicaid programs, state-based insurance exchanges, corrections depart-ments and attorneys general staffs – is-sued a white paper to encourage state governments to band together to forestall further damage to their budgets from prescription drugs.

Among the ideas they floated: • Regulate the pharmaceutical industry

like a utility • Import medicines from Canada • Prosecute drugmakers that violate

consumer protection laws protecting against predatory pricing monopolies

• Form procurement pools• Pass “transparency” laws requiring

drugmakers to disclose their costs or explain price hikes

Of course, these bills are not fail-proof, even if more do become law. There appears to be growing skepticism that transpar-ency laws can make enough of a dent, though, especially given that most of the bills failed to gain traction even as frus-tration has been rising over drug prices. There is, in fact, speculation that drug-makers will react to any such state law by raising prices below stipulated thresholds to avoid having to explain price hikes.

In effect, that would be the same sort of end run that some predicted would occur if Prop 61 had passed. One of the problems here is that lawmakers are caught between their constituents and the realities of the marketplace. They can demand all sorts of information, but that doesn’t necessarily mean that drug companies will be convinced to put a brake on rising prices.

There is no reason to think, however, that this will deter some state lawmakers from trying anyway.

“I don’t think the outcome of the elec-tions in Washington will have much effect

on this [effort] on the state level,” says Erik Gordon, a business and law profes-sor at the University of Michigan. “It’s a politically appealing issue. They will keep trying and will be able to get co-sponsors, because it’s better to be defeated while trying to do something good.”

Even so, the Republican victories in Washington are likely to give the phar-maceutical industry some needed con-fidence. During the weeks leading to the election, the Pharmaceutical Research and Manufacturers of America, the in-dustry trade group, told its members to cough up another $100 million in dues, collectively, that would be earmarked for battling drug pricing initiatives.

Meanwhile, drugmakers have gradu-ally begun to shift the conversation. Ever since Mylan NV chief executive officer Heather Bresch testified before Congress that her company didn’t keep all of the price increases that were taken each year, more attention has shifted to the role of the pharmacy benefit managers in the complex pricing maze.

Her argument was that, at the same time drugmakers are raising prices, they are also paying more rebates to the phar-macy benefit managers that negotiate coverage for their medicines with health insurers. Credit Suisse analysts noted in a report last May that rebates grew 28%, on average, between 2009 and 2015, and outpaced net sales growth of 5%.

The point is that rebates are growing faster than pharmaceutical sales. This contention is being repeated by more and more companies that come under attack for their pricing. After Bernie Sanders accused Sanofi, Novo Nordisk AS and Eli Lilly & Co. of price collusion, Lilly fired back by arguing that the net price of its insulins has not increased since 2009 and pointed to “complex reimbursement designs.”

Of course, rebates are a cost of doing business, and drugmakers can still try to raise prices to compensate. But this explanation is starting to gain some trac-tion. In fact, after Mylan’s Bresch testified before the House Committee on Oversight and Government Reform, lawmakers de-manded the company provide documents that include contracts with pharmacy benefits managers and distributors.

In effect, the pharmaceutical industry

is trying to deflect attention away from its pricing decisions and cast suspicion on the middlemen. Whether this maneu-ver will work is uncertain. The industry has tried a similar gambit by blaming higher drug costs on the rising co-pays and premiums that insurers charge their beneficiaries, but with mixed results.

Another key drawback to any transpar-ency law, meanwhile, is that lawmakers are, effectively, counting on being able to shame companies into peeling back the curtain on their strategies. That may be harder to do if the pharmaceutical industry believes Washington is unlikely to take any substantive action to slow or halt drug prices.

The working group acknowledged as much. Still, they argued that “knowledge about what contributes to surging prices, what profit is extracted by middlemen, and what incentives promote high-cost medication sales would help states de-velop and prioritize policy solutions to limit drug costs.” To make this work, the group suggests that confidential report-ing requirements could be imposed.

In any event, prices are already high enough for some Americans, and if prices continue to rise – for new and old drugs, alike – drugmakers can expect to con-tinue facing the same harsh criticism they have encountered for the past few years. Indeed, any drugmaker that believes the political overhaul in Washington is the proverbial green light to do business as usual may want to think twice.

The disenfranchised people who voted for Trump – indeed, most anyone who is experiencing rising drug costs – can still be expected to gripe on social me-dia and to their local lawmakers if they can’t afford their medicine. Affordability will remain a key pocketbook issue, no matter what.

State lawmakers, however, may want to shift or broaden their focus and consider requirements to assess the value of medi-cines, at least where choices exist. This approach – essentially, cost-effectiveness – is increasingly gaining traction among health plans, for instance. And then per-haps place a ceiling on prices. That may bring some companies to the table. iV004968

Comments: Email the editor: [email protected]

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om❚ MEDTECH MARKETS

Funded through direct taxation, UK health care is free at the point of care in the vast majority of cases, and has earned international plaudits, notably in a Commonwealth Fund study of 2014. In that international comparison of health care systems of 11 countries, the UK came out on top in nine cat-egories. But it was notably poor in the Healthy Lives category, measuring

such elements as infant mortality and quality of health at the age of 60.The issue for the UK as many see it is the systemic underfunding of health care.

UK health care services are demanded by a population of 65.1 million (June 2015) and growing, and yet the allocation of GDP to health care is studiedly mid-ranking at 9.12% (2014, including private expenditure), and well below the 17.14% allocated in the US (where just over half of expenditure is from private resources), according to the World Health Organization (WHO) Global Health Observatory data repository.

The Organization for Economic Cooperation and Development (OECD)’s comparison of countries in Health at a Glance 2015 puts the UK in the middle third for health ex-penditure per capita, and in the bottom third per capita for each of: doctors, hospital beds, MRI units and CT scanners. It is a picture that seems to highlight a different set of superlatives than those used in the Commonwealth Fund study. What is the medtech company supposed to make of these apparent opposites?

The UK Department of Health (DH) would likely call its approach necessary spending efficiencies; however, the National Health Service (NHS) went into acute overspend in 2015-16 – dipping to a record £2.45 billion loss. In fact, at a Westminster Health Forum (WHF) meeting in London in May 2016 it was reported that 65% of NHS providers are in deficit, including 39 Clinical Commissioning Groups (CCGs), which had overspent to the tune of £151 million ($183 million), and that the overall 2015-16 deficit is more like £3.5 billion “in reality.” The received wisdom is that for the coming periods 2017-18 and 2018-19, the NHS is set to experience the biggest funding drop in its history.

Is The UK Still Open For Medtech Innovation And Reimbursement?

Confusing and ineffective channels of innovation adoption and a lack of funding hamper the UK’s reputation as one of the world’s health care capitals and a driver of care excellence – in spite of its global brands, NICE, MHRA and the NHS itself. But changes that should transform market access are in place and are worthy of close attention in the next two to three years.

In spite of the major distractions of Brexit, the UK medtech industry recently refocused on its main brief of lobbying for speedy adoption and efficient procurement of innovation produced by an industry that generates £18 billion of sales annually in the UK and overseas.

Many see the UK as a large market, but not necessarily one to launch incremental or disruptive innovation. But three new reimbursement pathways and the Academic Health Science Networks offer the promise of improvement.

These and other initiatives are fleshing out the NHS’ Five Year Forward View, a plan to adapt affordable delivery to current patient demands with smart new care models. Medtech has a key role to play in the sustainability of the plan.

by Ashley yeo

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The NHS provides 85% to 90% of patient care needs in the UK. The strain on its resources prompted NHS chief executive Simon Stevens to quantify a financial black hole of £30 billion that he suggested should be filled by £8 billion of extra government cash and £22 billion of internal productivity and efficiency savings, annually, by 2020-21.

Stevens, recruited from the private sector in 2013, has been quick to appraise the NHS’ needs – from budgeting through system transformation through staffing, post Brexit-meltdown. He set out his vi-sion in October 2014 in the groundbreak-ing Five Year Forward View (5YFV). If his vision fails, it won’t be for any lack of application on his part.

In November 2015 NHS England secured a frontloaded NHS funding settlement of £8.4 billion to kick-start the 5YFV. It argues that the plan’s success will depend on “intensified prevention and public health, a well-functioning social care system, and targeted revenue and capital funding for service transformation.”

But as recently as October 31, 2016, po-litical spats were still raging over whether this cash was actually being made avail-able, incrementally as promised – and what the true amount is.

UK Market Access For MedtechIf all this paints a picture of difficult market access conditions in the UK, it’s one with which local manufacturers are accustomed.

The main UK medtech trade industry associations (the Association of British Healthcare Industries – ABHI – for medi-cal devices and the British In Vitro Diag-nostics Association – BIVDA) split their time fairly evenly on two major themes: regulatory issues, especially in view of the now-finalized twin EU Medical Device and IVD Regulations (MDR and IVDR); and the problems with and/or lack of the pace in NHS medtech adoption. (Also see “Brexit: What Now For Device Notified Bodies, CE Marks And The Future MDR/IVDR?” – Medtech Insight, June 30, 2016.)

And Brexit is a subtext to everything at present. Indeed, for the UK regulator, the Medicines and Healthcare products Regu-latory Agency (MHRA), Brexit has become the “the greatest area of thought for the agency at present,” agency chief execu-

tive Ian Hudson, MD, said at a meeting of industry professionals in mid-September (WHF, London, September 15).

However, for the medtech companies, whether UK-based or foreign, the key preoccupation is selling into the NHS – Brexit-affected as it may well become. Navigating the NHS to get a product, service or procedure into commercial use can be far from straightforward, even with a proven, money-saving innovation. That has been the experience of UK SME Forte Medical Ltd., for instance, which

has discovered that engaging with the system can be fraught with problems. (See sidebar, “Medtechs Bemoan Circu-itous Journey To Access UK NHS.”)

NICe Conundrum – benefits For Medtech?CE-marked products can be placed on the market in the UK in any setting of care – while the UK remains an EU mem-ber state, at least. That alone does not guarantee commercial uptake, however. Products that represent a new care path-way or are radically different or innova-tive may qualify for a National Institute for Health and Care Excellence (NICE) appraisal – via the Medical Technolo-gies Evaluation Programme (MTEP) or the Diagnostics Assessment Programme (DAP). Unlike the Technology Appraisal (TA) pathway, which mainly serves the drug industry, devices are not selected by NICE, but must be proposed by the company itself.

The purpose of NICE guidance is to increase understanding of a technology or procedure. It helps make a proper case with the commissioners of clinical care (the 209 CCGs) and the trusts. But it does not guarantee adoption. There is no link.

The issue of this “NICE disconnect” is constantly raised for public scrutiny by the ABHI. The industry sees in this an unfair treatment for medtech. If a drug undergoes the NICE TA process, it is a mandate to be funded and made avail-able. This does not happen in medtech.

NICE attempted to address this per-ceived imbalance with its Innovation Scorecard, which is a mechanism by which national clinical directors can assess where innovation is/is not being introduced. Many see it as a worthy idea that has however not had a telling effect and moreover is resource heavy. The feel-ing is that, its benefits unclear, its days might be numbered, for medtech at least.

NICE has latterly mooted fees for its HTA work on TAs. At present, no fees are planned for medtech, but the sense is that the issue is not entirely off the agenda, even though the consensus is that making charges for guidance that is not linked to payments or uptake would be a difficult step to take.

The ABHI feels that fees of this nature should be a last resort. It is indignant

NHS’ Stevens is

trying different

mechanisms to

ensure that

innovations reach

the market. He has

announced three new

channels of access

that will serve as

guaranteed routes

to get innovation in

the market and

reimbursed.

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about any suggestion of an additional fee burden on companies whose products are being assessed for public benefit. During a recent consultation that closed in late September, it registered its full objections on principle and on economic grounds. Unless derailed, it seems that TA fees (which do have the potential to impact certain medical technologies and companion diagnostics) will go ahead as of May 2017.

Procurement Under Renewed scrutinyAlong with adoption and reimbursement, the theme of procurement – securing or purchasing goods and services within the NHS’ commissioning of care remit – is another of the elements of the system that can be frustrating to companies.

Procurement of device and pathology services are under renewed scrutiny fol-lowing publication of the final report of Lord Carter, “Operational productivity and performance in English NHS acute hospitals: Unwarranted variations.” Is-sued in February 2016, its recommended actions aim to save the NHS £5 billion each year by 2020-21.

Indeed, the NHS procurement system in the UK has long been a bugbear of manufacturers – with industry often accusing agents such as the DHL-owned NHS Supply Chain and NHS Shared Busi-ness Services of doing little but charging manufacturers for market access. Com-panies can deal directly with providers, and local deals can happen outside the Supply Chain, but the bottom line for them is being paid properly.

Supply Chain has another 1.5 years of its extended contract to run, after which there will be a new model of UK procurement based around 11 “operating towers” that will be going out to tender. The DH will coordinate and monitor the success of the new system, which is an-other attempt to standardize products, supply routes, service specifications, commissioning requirements and clinical performance.

The move to evidence- and outcomes-based models of payment are more talk than action right now, but the intent is firm and indeed they are key to Stevens’ New Models of Care (as featured in the 5YFV). They are gathering support and

understanding. The sense that the UK is moving slowly toward accountable care organization (ACO)-style systems is palpable. They are being broached at CCG level in the UK, using the new Sustain-ability and Transformation Plans (STPs).

Lord Prior of Brampton, a junior health minister and one of the new intake in Prime Minister Theresa May’s post-refer-endum government, believes the UK NHS is at the point of no return. “There is no plan B,” he told ABHI meeting delegates on November 2, 2016, adding, “we are fully committed to the STP process.”

The STPs were announced in NHS plan-ning guidance published in December 2015. NHS organizations in different parts of the country have been asked to col-lectively develop “place-based plans” for the future of health and care services in their area. Draft plans were submitted in June 2016, and final plans were expected to be completed in October 2016.

These are intended to help local areas deliver the Five Year Forward View vision of greater integrated care, and evolve new models of care that look at whole-system design across health and social care over the next four years.

Tariffs And ReimbursementIf STPs are a welcome move, ABHI market access director Andrew Davies is acutely critical of how medtech tariffs work in the UK. If a company is introducing a new technique, it needs a tariff as the mecha-nism for providing reimbursement.

But securing a tariff is usually a slow and complex process, especially given limited budgets and the potential for competing therapies to be “defunded” as a consequence. The tariff is also based on figures that are two to three years old, and moreover regional differences mean that local tariffs may be applied, depending on the population needs, which could affect the national tariff. “Getting into the tariff system is hard, and it takes a long time to get reimbursement coding. It also takes a long time for reference pricing to catch up,” says Davies.

In specialized services areas, which commission expensive and/or high-risk products and procedures for use in the inpatient setting, a prioritization system is increasingly referencing benefit and cost-effectiveness. It is a strong indication that

❚ PbR And HRGs: THe UK’s Own dRGs And COveRAGe sysTems

Payment by Results (PbR) is the system used to pay providers for treatments delivered. The levels depend on the complexity of the treatments. PbR covers the majority of acute care settings. If a technology is used in the inpatient setting, it is likely to be covered by PbR.

Technology used in the com-munity or home setting will be commissioned by CCGs under block contracts or, rarer, via a direct procurement model.

The UK system of Healthcare Resource Groups (HRGs), which are similar to DRGs, is currently being updated to become the HRG4+. The current HRG4 sys-tem includes 1,500 groups, each covering episodes of care from admission to discharge. It relies on the cost to treat, and if manu-facturers can prove that they can save money (by reducing length of stay or supporting local policy), they stand a chance of getting a good tariff. But without cost impact data, a product will not be used in the NHS.

The UK uses ICD-10 as its national classification of diseases, and OPCS 4 (Office of Population, Cen-suses and Surveys) for interven-tions. (The US uses CPT coding.)

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evidence-based models are becoming more important. Davies says it is “crucial that both clinical and health economic evidence are considered; even if a technology is cost-effective, it doesn’t automatically get the green light, as there is always the afford-ability question.” He adds, “a product can be reimbursed and still not be adopted.” The three types of UK national reimburse-ment for medical technology products were recently listed by industry consul-tant Arthur Brandwood as follows:

•The Drug Tariff – which is run by the Department of Health – is aimed at con-sumables and is suitable for prescription-based products (drugs and appliances) used in the community or primary care setting. In this context, Part IX of the Drug Tariff applies. It includes lists of ap-pliances and dressings, incontinence ap-pliances, stoma appliances and chemical reagents that are allowed to be prescribed. GPs are aware that if they dispense an item that is not in Part IX, they will not reimbursed for it.

•The National Tariff – which covers the majority of items used in the acute care setting (see box – PBR & HRGs – The UK’s Own DRGs and Coverage Systems). The NHS conducts also annual reviews of new treatments and services that it will make available under specialized service com-missioning. These are services provided in relatively few hospitals, accessed by comparatively small numbers of patients, and usually located in specialized hospital trusts. It has an annual spending budget of £15.6bn (2016-17) – but only £500m is allocated to “high-cost devices”.

•Capital equipment – which is run at acute trust level, in terms of purchasing.

Three New Reimbursement Routes For Medtech InnovationsMuch to his credit, Stevens is trying different methods and mechanisms to ensure that medtech innovation reaches the UK market. At the NHS Confederation annual general meeting in June 2016, he announced that three channels of access will be the guaranteed routes to get in-novation in the market and reimbursed.

This is welcome news. Over the years much breath has been spent and ink spilled

over new initiatives that promised to do precisely that, but they all foundered for one reason or another. The Wanless report of 2002, for one, is often evoked for its lu-cid – and portentous – messages about the need for sustainable funding of health care in order to forestall just the sort of disaster many feel the NHS is now on the cusp of.

Stevens calls it a “new innovation diffu-sion funding mechanism” that is consistent with the policy direction of the DH’s Ac-celerated Access Review, the final report of which was issued after much delay on October 21, 2016. His new Innovation and Technology Tariff presents “for the first time” a clear “route to market” for innova-tions identified by the NHS England’s three new “real-world” assessment programs. These programs are:

•The NHS Innovation Accelerator (NIA) program, which was launched in 2015 to support individuals to develop and introduce high impact, tried and tested innovations into the NHS. By autumn 2015, 68 more organizations were using NIA in-novations than at the start of the program.

•The NHS test beds program (launched at the World Economic Forum in January 2016) – seven “real-world” test beds were set up in January 2016 to evaluate new technologies that offer better care at the same, or lower overall, cost. They will produce evidence of the impact and cost-effectiveness of their innovations in 2018.

•NHS England’s Commissioning through Evaluation (CTE) program, which enables a limited number of patients to access treatments that are promising but not yet funded by the NHS, while new clinical and patient experience data are collected within a formal evaluation program.

The NIA is kicking off the plan in 2016-17. The other two routes will follow in 2017-18. These explicit national reimburse-ment routes for new medtech innovations should accelerate the uptake of new medtech devices and apps for patients with diabetes, heart conditions, asthma, sleep disorders and other chronic health conditions. Other areas such as infertil-ity and pregnancy, obesity reduction and weight management, and common mental health disorders will also benefit.

The new system is designed to make it

❚ FACTs And FiGURes On nHs And medTeCH UK

NHS England had a budget of £101.7 billion for 2015-16, rising to £119.6 billion by 2020-21.

£72.5 billion of this was allo-cated to the CCGs; £10.4 billion to primary care; and £14.3 billion to specialized commissioning.

There were some 3,268 compa-nies in the UK medical technol-ogy sector in 2015, generating a turnover of £18.1 billion (do-mestic and overseas), employing some 88,000 people directly.

The top five core product seg-ments in the UK are single-use technologies, IVDs, orthope-dic devices, wound care and management, and ophthalmic devices. Note: Scotland’s 5.3 million popu-lation is served by NHS Scotland’s system of 14 regional boards, seven specialist boards and a central pro-curement system; Wales’ 3.1 million population is served by seven Local Health Boards (LHBs) and three NHS Trusts; and Northern Ireland’s 1.9 million population is served by a Health and Social Care Board and five HSC trusts.

Sources: NHS England – Annual Report 2015-16; Strength & Oppor-tunity 2014

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easier for clinicians and innovators to get uptake and spread across the NHS. The Innovation and Technology tariff category will remove the need for multiple local price negotiations. Instead, there will be the guarantee of automatic reimburse-ment when an approved innovation is used. In addition, NHS England can nego-tiate national “bulk buy” price discounts on behalf of hospitals, GPs and patients.

AhsNs – Are They Up To The Job?The Academic Health Science Networks (AHSNs) are a relatively new concept and are designed to identify and promote in-novation in the NHS. They are described as a bridge to commissioning and facilita-tors of engagement. There are 15 AHSNs around England. “The NHS is a slow adopter,” Rob Berry, head of innovation and research at the Kent Surrey and Sus-sex (KSS) AHSN,” believes, but he adds, “it is what it is, and it is down to companies to

adapt their strategies accordingly.”The networks are now attempting to

move into a new phase whereby they exploit each other’s capabilities better. Berry, speaking at 2016 annual general meeting of BIVDA, stressed that “the UK is not a perfect market, but AHSNs of-fer support at various stages.” They are not just open to UK companies – those from Finland, Singapore and Ireland are already using AHSNs.

Their help may be much needed to prove the case for innovations. The NHS discretionary spend (the budget) doubled between 2000 and 2008, but the NHS has now entered a unique time – one of continual reduction of the spend on the NHS, says Berry.

After many months of delay, the UK government-commissioned, indepen-dently compiled Accelerated Access Re-view (AAR) was released in the mid-fall to provide both a structure to, and a tailwind

behind, the rapid uptake and spread of medical technology innovation in the UK.

Launched in 2014 (by minister for life sciences, George Freeman), the AAR has the task of recommending the conditions for making innovative medicines, medi-cal technologies, diagnostics and digital products available to NHS patients more rapidly than has been the case. A global medical technology innovation “power-house” might result. At least, that is the fond hope of the ABHI.

Industry has signaled its support for the AAR, which supports some actions already underway (via the Vanguards and Academic Health Science Networks – AHSNs) as examples of new care models that can deliver change. (Also see “UK Accelerated Access Review Can Create A Post-Brexit ‘Medtech Powerhouse’” – Medtech Insight, October 24, 2016.) Some believe the AAR has been released to give a fillip to a UK industry still reeling by the

❚ medTeCHs bemOAn CiRCUiTOUs JOURney TO ACCess UK nHs

Forte Medical ltd.’s story is an example of how SME innova-tors can be pushed to the edge of existence if their genuine approaches are rebuffed by any one of the many decision-making bodies in the NHS.

Giovanna Forte, chief executive of Forte Medical, has sev-eral times this year alone stood on podiums and recounted the tortuous path that her company has had to follow, and her experiences stand as a salutary tale for similar compa-nies and wannabes – those making efforts to get a proven innovation adopted and into UK NHS circulation.

Forte Medical is over 10 years old, but only recently scored a meaningful success in getting the message about its technology, a non-touch urine collection system called Peezy Midstream, understood. That was at Pitch@Palace, in October 2016, a competition that offers selected technol-ogy businesses the chance to pitch to a global audience of influencers who can catapult them to the next level.

That breakthrough notwithstanding, Forte Medical’s ex-periences of recent years show that taking on the UK NHS is not for the faint-hearted.

Giovanna’s GP brother, Vincente Forte, MD, invented the device, which secured its first funding in 2006. Forte Medical released the product in 2009, and it reached the UK market in 2010. The rationale of Peezy Midstream is that, of the 65 million urine samples delivered to the NHS every year, up to – and often over – 30% are unreliable due to contamination.

In spite of this, there is no single NHS protocol to al-low urine to be accurately collected, Giovanna notes. As a consequence, patients with UTIs are not being diagnosed,

and/or are being given broad-spectrum antibiotics that are failing. “It was, and is, an unmet need,” says the CEO, who points out that urine can be used to diagnose any number of conditions including cancer. “In a non-touch world, our very simple device gives a first-time diagnosis,” she claims.

But the company had to establish evidence for the device. Trials to prove reduced contaminations are hard to secure and can be costly – Forte Medical was quoted £135,000 ($165,000) by one UK trust to run a trial (the true cost of which the company later found to be less than a fifth of this total). The firm finally scored successes in trials at the UCL Medical School (a three-year trial) and Barts Health (The Royal London Hospital), which showed contamination rates being reduced from 17% to 1.5%.

Results from a two-year study of urine collection methods across 1,100 patients at stanford University school of Medi-cine are due to be released imminently.

These money-saving outcomes in theory should have al-lowed Forte Medical to go to procurement in the UK, but the company came up against a brick wall of inaction. The UK NHS’ QIPP (Quality, Innovation, Productivity and Prevention) pathway failed to acknowledge its approaches, for example.

It took four years to get the product onto the DHL-run NHS Supply Chain, Giovanna recounts. “That’s a struggle for SMEs that have to keep generating funding.” Forte did get onto “e-direct,” one part of the Supply Chain, and generated some income, but found that it was losing on every order because fulfilling orders directly removed any profit; the Supply Chain will not stock a product until it has achieved a

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Brexit vote of June 23.Specifically, it: pledges a renewed NICE

focus on medtech, which could lead to an effective route-to-market for key tech-nologies; proposes alignment of national evaluation processes; focuses on “real-world evidence”; supports “commission-ing through evaluation”; and aims to use the full potential of the AHSNs to promote innovation adoption, using local networks for local implementation.

Cynics might view it as another worthy NHS/DH initiative that will eventually be superseded. The UK NHS and DH, sadly, have a track record of grand innovation adoption schemes quietly coming to a halt. But right now, enthusiasm for the AAR prevails.

Final Words – A Culture shift begins?Indeed, the UK’s “DNA legacy” is to be involved in health care. So says industry consultant Arthur Brandwood. Brexit

might yet mean a UK recession. Or maybe resurgence in health care, for the UK remains a big market for medtech, if not exactly a launch market in the way Ger-man and the US markets are.

For the UK, there are potentially very tough times ahead, and Brexit has no doubt made companies, already nervous about broaching market access in the UK, even more trepidatious. But the AAR, and 5YFV represent positives for those innovators that have technologies that can make a difference to the system ef-ficiencies and patient care.

Equally encouraging, NHS England and NHS Improvement recently pub-lished the NHS Operational Planning Guidance, which, for the first time, cover two financial years. The 2017-18 and 2018-19 guidance enables NHS trusts and com-missioners to plan for the years ahead, underpinned by a two-year tariff for NHS patients and a two-year NHS Standard

Contract. The guidance was also pub-lished three months earlier than normal, to allow local leaders more time to plan their priority areas such as cancer, mental health, learning disabilities, primary care and urgent and emergency care.

Are these elements, coupled with Stevens’ new reimbursement channels, enough to change perceptions about the UK? The UK has the global health care brands – NICE, MHRA and even the NHS itself. But maybe that raises expectations of performance in the local market in terms of innovation adoption, procurement and reimbursement. These expectations are not entirely born out in reality, or at least not yet. IV004964

certain volume. “It’s a vicious circle,” she says.Keeping up with Supply Chain’s tendering schedules and

monitoring the NHS framework require time and attention. Frustrated by events, the company contacted NHS England chief executive Simon Stevens as well as NHS England’s national medical director, among many others, to complain about its difficulties with the Supply Chain.

NHS England recommended that Forte seek out the Test Beds route. “But how much time does this take and how much money does it take for a small company to keep go-ing for months and years while trying to work with the NHS, offering solutions that will save in our case £30 million on reducing retests and much more by way of efficiency sav-ings?” asks Giovanna.

Forte Medical has actually kept itself going with LDA fund-ing, angel funding and match funding. It has explored but rejected the idea of private equity funding. It has applied for grants, “a very time-consuming activity,” and entered innovation awards competitions, albeit with no guarantee of winning. “It has cost us £3 million to keep going over 10 years – and over three iterations of the product.”

It has also, meantime, uncovered the need for new specimen collection systems to assist with novel early-stage cancer urine tests; work has commenced on these designs, with acceleration planned once the Peezy Midstream is generating revenue for the company.

With some laboratories – NHS and private – being re-munerated on volume rather than quality, the incentive to reduce retesting is not always compelling. But Giovanna

stresses that accuracy and right-first-time testing needs to be the benchmark for specimens used for laboratory investi-gations in order for this product to be more readily welcomed by those that mastermind urine screening.

The NHS is evidently a hard market in which to launch clinical innovations, but after much work over many years, Forte Medical at last seems to be making some headway. Giovanna’s advice to budding device compa-nies with ideas like hers is as follows:

• Make sure you’re well-funded.

• Look out for first tenders and timings.

• Generate evidence, even if you’re going to have a hard time with the NHS. (“It’s worth it – if we had done that several years ago things might have hap-pened faster, but we didn’t have the money then.”)

• Establish your cost benefits.

• Gather champions and advocates and get the sup-port of users.

• Engage clinicians. Go to nurses. Talk to patients.

• Find good sales executives.

• Participate in industry bodies, like SEHTA (the South East Health Technologies Alliance), which support health technology businesses and foster collaborations between academia, business and clinicians. SEHTA has been a useful networking body for Forte Medical, as has the ABHI.

Comments: Email the author: [email protected]

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om❚ OUTCOMES-BASED CONTRACTS

Outcomes-based risk sharing contracts between private payers and pharmaceutical manufacturers are still a relatively minor factor in the US reimbursement landscape despite a handful of widely publicized examples and heightened interest in pursuing such deals.

That’s the view expressed by some of the more active US-based payers involved in developing outcomes-based risk sharing arrangements for prescription drugs, which generally link coverage and payments to real-world performance and incorporate the concept that manufacturers and payers share the financial risk as-sociated with outcomes.

“I would say the interest has increased significantly but the execution has increased only modestly,” says Harvard Pilgrim Health Care Inc. specialty and pharmacy contracts manager James Kenney. “Outcomes-based contracts are early in their de-velopment but they are critical steps that must be taken to inform the structure and design of future agreements,” says Humana Inc. pharmacy solution president William Fleming, PharmD.

Humana is considered the most active large private payer engaged in outcomes-based risk sharing contracts. The national insurer has about 15 contracts currently in place, covering 20 drugs, Fleming says. But the company has chosen not to announce the contracts, so its activities have not garnered widespread public attention.

Mid-sized regional health care system Harvard Pilgrim currently has three outcomes-based risk sharing contracts and has several more in the works. It has been one of the more high-profile players in the field (see box). The health care provider has regularly issued press releases on its contracts, most recently for Eli Lilly & Co.’s Trulicity (dula-glutide). (Also see “Lilly’s Performance Contract For Trulicity Hinges On Head-To-Head Superiority” – Pink Sheet, June 29, 2016.)

It’s very difficult to accurately pinpoint the number of outcomes-based risk sharing

US Outcomes-Based Contracts: Big Uptick In Interest, But Not Execution

The promise of outcomes-based

contracts for biopharmaceuticals has

yet to be realized in the US. Although

precise numbers are hard to come

by, payers and manufacturers agree

the field is still nascent. However,

they don’t seem to be giving up on

the idea.

To date, there’s been more talk than action in creating outcomes-based contracts between payers and pharma manufacturers.

It’s hard to know the actual number of agreements in effect because many payers are reluctant to divulge that information.

One reason for slow uptake is the difficulty in executing these agreements, compared with more familiar cost reduction efforts such as rebates and discounts. There are also perceived regulatory obstacles.

These early experiments, while few in number, are at the very least spurring development of the data infrastructure needed to assess the impact and value of outcomes-based contracts.

by Cathy Kelly

Shut

ters

tock

: Lig

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ring

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OUTCOMES-BASED CONTRACTS ❚invivo.pharm

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contracts currently in effect in the US because many large payers, like Humana, don’t publicly announce them.

UnitedHealthCare officials told a meeting of the International Society for Pharmacoeconomics and Outcomes Re-search in May that it is aiming to expand its value-based contracting by executing three to five new ones in 2016. The insurer had only one in effect at that point. How-ever, the company has not announced any further contracts to date. Similarly, Anthem Inc. does not publicly disclose such contracts, according to corporate communications director Joyzelle Davis.

Nor do many manufacturers, although again there are exceptions. Novartis AG has publicly announced its inter-est in outcomes-based contracts for its heart failure drug, Entresto (valsartan/sacubitril). And Amgen Inc. has been open about pursuing outcomes-based contracts for its PCSK9 inhibitor, Repatha (evolocumab).

“I think there are a variety of reasons why there is/is not publicity about some contracts,” Avalere Health VP, health economics and outcomes Kathy Hughes told In Vivo in an email. “Some payers are eager to publicize their efforts; others do not want to be barraged by potential con-tractees – they prefer to be in the driver’s seat rather than the converse. Similarly, manufacturers have varying philosophies about publicity/confidentiality – some fear ‘competition’ through public dis-closure; others want to attract attention generally or specifically to enter into additional contracts.”

To add to the difficulties in tracking the deals, manufacturers and payers don’t seem to have a consistent definition for them. “We know that there are a variety of arrangements that come under the general heading of risk-based contracts, outcomes contracts, outcomes-based risk sharing arrangements and a range of other names,” Hughes commented. “Their specifics can vary dramatically – and some (personal opinion), I would not put into any of these categories – I would say they are discounts with a few bells and whistles.”

The publicized contracts are primarily in the commercial insurance space. (See Exhibit 1.) There are special obstacles to executing outcomes-based risk sharing

contracts in Medicare, such as concerns with violating federal anti-kickback laws. (Also see “Value-Based Contracting Needs Federal Safe Harbors To Flourish, Lilly Says” – Pink Sheet, June 15, 2016.) Manufacturers say they are seeking specific “safe harbor” guidance from the HHS Office of Inspector General before they venture into such novel contracts in Medicare.

Outcomes-based Contracts Still Considered hard to DoBut even in the private market, the rea-sons such contracts have not gained more traction to date generally revolve around the fact that they’re hard to do. Contracts involving traditional rebate or discount arrangements are easier and more fa-miliar to manufacturers and payers, so continue to be much more common.

Challenges in executing outcomes-based risk sharing contracts include agreeing to appropriate and feasible end-points that could demonstrate a drug per-forms to expectations. In addition, payers may not have the data infrastructures in place to support contracts, making collection and processing the necessary information difficult and expensive.

Nevertheless, outcomes-based risk sharing agreements offer manufacturers an opportunity to gain access to reim-bursement in an environment where pay-ers are increasingly cost conscious and interested in data demonstrating a drug’s value. The pressures are real and grow-ing. (Also see “A Road Map To Strategic Drug Pricing” – In Vivo, March 16, 2016.)

For payers, outcomes-based risk shar-ing contracts can offer more certainty around expenses. So manufacturers

and payers keep talking about them and are finding ways to reach agreement in certain cases. The recent proliferation of tools to score the relative efficacy, safety and costs of competing products can help advance the discussions. (Also see “Scoring Value: New Tools Challenge Pharma’s US Pricing Bonanza” – In Vivo, October 21, 2015.)

One of the more successful drugs in terms of outcomes-based contracts ap-pears to be Novartis’ Entresto, which is struggling to compete with much less expensive options after launching in mid-2015. (Also see “Novartis To Payers: Entresto Works Or You Get A Discount” – Scrip, February 12, 2016.) The three con-tracts for Entresto that have been publicly announced tie outcomes payments to the drug’s ability to help patients avoid hospitalization, a relatively clear-cut out-come demonstrated in Entresto’s clinical trials – and an expense payer’s would be eager to avoid.

“To me, the best kind of contract is one that is simple and to the point. And the best example I could give you is one that is tied to hospitalization,” says Humana’s Fleming. “If a person gets hospitalized while on treatment that’s probably a bad outcome for a patient. It means something didn’t work, maybe the patient didn’t take the medication as directed, or maybe the treatment was just ineffective. It could be a range of possibilities.”

“If we know that patients who are adherent on Entresto are going to have … 17% less hospitalization, which is what the clinical trial data show, over a one- or two-year period, you can begin to project what that savings might mean for the plan, and maybe it’s an opportunity

❚ Payers and OutcOmes-Based risk-sharing cOntracts

humana: 15 in effect, details not available

Cigna: six in effect

harvard Pilgrim: three in place, plans others by year-end

UnitedhealthCare: one in effect as of May, plans three to five in 2016

aetna: confirms two that were announced by drug firms but will not disclose possible others

anthem: does not disclose

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om❚ OUTCOMES-BASED CONTRACTS

to change the formulary or encourage use of the product,” Harvard Pilgrim’s Kenney points out.

Contracts have also been announced in the crowded and highly competitive diabetes category. One involves Eli Lilly’s two-year-old GLP-1 agonist, Trulicity. (Also see “Lilly’s Performance Contract For Trulicity Hinges On Head-To-Head Superiority” – Pink Sheet, June 29, 2016.) And Merck & Co. Inc. has two publicly disclosed deals for its 10-year-old dia-betes blockbuster, Januvia (sitagliptin). (Also see “Merck/Aetna Pact Links Januvia Value-Based Payment To Treatment Inten-sification” – Pink Sheet, October 11, 2016.)

Manufacturers blame Regulatory ObstaclesIn public discussions, manufacturers point to regulatory challenges as major obstacles preventing more wide-scale adoption of outcomes-based contracts. Medicaid’s “best price” requirement is often cited as a significant barrier. Under Medicaid rules, pharmaceutical manu-facturers must offer Medicaid agencies the cheapest price they give any payer (with a few exceptions, such as the De-partment of Veterans Affairs).

That means if a drugmaker enters into

an outcomes-based contract with a pri-vate health plan and then has to provide the agreed-upon discount, the resulting price could become the new benchmark for calculating the Medicaid best price. The rebates offered to a private insurer under one value-based contract could establish a new and lower price that must be offered to all Medicaid programs.

Nevertheless, the Medicaid best price challenge is not insurmountable, payers believe. “The best price issue is valid. However, it’s completely manageable,” Kenney maintains. “The way around it, very simply, is you put a clause in the contract to protect them … that says we have all these outcomes components in there and at no point in any given quarter will an outcomes payment combined with the base rebate exceed” the Medicaid rebate, he says.

The other regulatory obstacle often cited by manufacturers has to do with FDA’s restrictions on off-label communi-cations between manufacturers and pay-ers. However, “I’m not sure I buy into that directly,” Humana’s Fleming says. “If I look at a manufacturer and say, ‘I want you to take risk on hospitalization – if a member is hospitalized while on your treatment for any reason, then you ought

to be held accountable for that’ – some manufacturers might say, ‘I’m willing to do that but that’s not in my label, so I can’t.’ I’m not sure I buy that FDA would say they couldn’t take that type of contract.”

That’s not to say that payers don’t sup-port more flexibility in FDA’s regulations around manufacturer/payer communica-tions. They are particularly interested in getting more information on a drug before it is approved, so they can more effi-ciently plan ahead for expenses, Fleming points out. (Also see “Alzheimer’s Drugs and Medicare: A Case For Pre-Approval Discussions” – Pink Sheet, September 21, 2016.)

building Data Infrastructure May be best OutcomeIt may be that the best outcome from current experiments will be creating the necessary data infrastructures to support future arrangements. Express Scripts Holding Co. chief medical officer Steve Miller, MD, has suggested that will be the case, predicting they probably will not do much to lower costs initially. (Also see “Building A Foundation: Express Scripts’ Miller On Recent Outcomes-Based Con-tracts” – Pink Sheet, February 29, 2016.)

Cigna Corp. senior VP, integrated clinical and specialty drug solutions Christopher Bradbury agrees about the value of building data systems. “This is one of the wonderful parts of these outcomes-based incentive agreements,” he said in an interview. “It pushes us and others forward in terms of investing in ad-ditional analytics, investing in additional insights that help us understand, and the industry understand, what type of value clinically and financially is driven short term by different products.” (Also see “Cigna’s Bradbury Talks PCSK9 Contracts And Value Versus Volume” – Scrip, May 11, 2016.) It is hard to know whether the contracts are saving money or improving outcomes because little to no data have been publicly released on how the ar-rangements are working. However, Cigna is committed to being more transparent about results, Bradbury said. IV004953

❚ medicaid Best Price cOnundrum

Here’s how manufacturers fear it might play out, according to Harvard Pilgrim specialty and pharmacy contract manager James Kenney: most outcomes contracts have a base rebate blended with an outcomes pricing component. If the base rebate is 20% and the outcomes component could yield an addi-tional 5%, the net price discount under the contract could be 25%, which represents a deeper discount than the 23.1% base rebate required for brand drugs in the Medicaid program. For the manufacturer, that would create a 1.9% price “liability” to Medic-aid agencies across the country.

Comments: Email the author: [email protected]

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OUTCOMES-BASED CONTRACTS ❚invivo.pharm

amedtechbi.comDrug ManuFacturer Payer DescrIPtIon Date

Januvia (sitagliptin)Janumet (sitagliptin/metformin)

Merck aetna Merck will pay larger rebates if patients on its drug need to add therapy to reach Hba1c goals.

Press release by aetna october 2016; starts Jan. 1, 2017

Januvia, Janumet Merck cignaMerck will provide discounts if patients adherent on drugs, show improvement in Hba1c.

announced by cigna april 2009

trulicity (dulaglutide) Lilly Harvard Pilgrim

Price rebates tied to how well trulicity performs versus other gLP-1 agonists.

Press release by Harvard Pilgrim June 2016; began Q3 2016

entresto (sacubitril/valsartan) novartis Harvard

Pilgrim

novartis accepts lower net price if hospitalization reduction rates do not replicate clinical trials.

Press release by Harvard Pilgrim June 2016; begins Q4 2016

entresto novartis aetna novartis accepts lower net price if hospitalization reduction does not replicate clinical trials.

Disclosed by novartis in investor call Jan. 2016; began Jan. 1, 2016

entresto novartis cigna novartis accepts lower net price if hospitalization rates not reduced.

Disclosed by novartis in investor call, press release from cigna, early 2016

repatha (evolocumab) amgen cigna

amgen provides additional discounts if LDL cholesterol reductions not in line with clinical trial results.

Press release by cigna May 2016

Praluent (alirocumab) sanofi, regeneron cigna

amgen provides additional discounts if LDL cholesterol reductions not in line with clinical trial results.

Press results by cigna May 2016

repatha amgen Harvard Pilgrim

amgen provides additional discount if LDL cholesterol reductions not in line with clinical trial results.

Press release by Harvard Pilgrim nov. 2015; began Q4 2015

repatha amgen cVs Health net price linked to cholesterol reduction, appropriate patient use in return for preferred formulary status.

Press release by amgen nov. 2015

Harvoni (sofosbuvir/ledipasvir)

gilead cignanet price discount, linked to outcomes, in return for preferred formulary status.

Press release by cigna Feb. 2015

rebif (interferon beta-1a) eMD serono cigna net price linked to hospitalization,

er visits avoided.

Joint press release by eMD serono, cigna March 2011

Iressa (gefitinib) astraZeneca express scripts

Manufacturer has agreed to rebate a set amount if Iressa is discontinued before the third fill for any reason, including patient non-response.

effective april 1, 2016

source: company reports and publicly available data

exhibit 1Publicized, active us outcomes-Based risk sharing contracts

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❚ REGENERATIVE MEDICINEin

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Curative Regenerative Medicines: Preparing Health Care Systems For The Coming Wave

More than 700 companies are working on new gene, cell and tissue engineering therapies that have the potential for profound and durable responses in patients with a diverse array of serious and costly conditions, many of which lack current treatments.

The health care market is grappling with ways to articulate and assess the value of these potential curative treatments, some of which may be administered only once or a few times.

There are a number of proposed alternative reimbursement and financing models to address the potential uncertainty and economic disincentives that may be associated with curative therapies.

Emily Whitehead was diag-nosed with an aggressive form of cancer called acute lymphoblastic leukemia (ALL) at the tender age of

5 in 2010. She had relapsed twice after chemotherapy and was out of options and near death when she was treated with an experimental chimeric antigen receptor T cell (CAR-T) gene therapy at Children’s Hospital of Philadelphia (CHOP) that saved her life. Emily’s story was published on the front page of the New York Times in December 2012.

Three years later at the American Soci-ety of Hematology Annual Meeting, phar-maceutical giant Novartis AG revealed that Emily was not alone. More than 90% of patients with relapsed refractory ALL treated with the same CAR-T therapy – being developed in a large multi-site clinical study including CHOP that is now sponsored by Novartis – had their

disease go into complete remission. Additional companies using similar

approaches for other malignancies have reported exciting early results, prompting many to dare speak of a “cure” for cancer. In fact, when US Vice President Joe Biden called for a “moonshot” effort to “end cancer as we know it,” he did so fully aware of the promise of such gene and cell therapies already under development and rapidly approaching the marketplace.

But treatments for cancer are only the tip of the iceberg.

We are at the cusp of a global revolu-tion in medicine. Medical researchers and product developers are now poised to bring forward new gene, cell and tis-sue engineering therapies that hold out the promise of profound and durable responses – often with just a single treat-ment – for patients with a diverse array of serious and costly conditions, many of which lack current treatments.

BY Faraz ali, ted slocomB and michael werner

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We may be at the dawn of a new era of curative regenerative therapies, but their inherent nature may create barriers to adoption. The Alliance for Regenerative Medicine frames the opportunities and challenges for the industry, arguing that policy makers must begin to understand the ways that these therapies represent value for money.

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The shared mission of these tech-nologies is to establish – or restore – the healthy functioning of human cells in patients with cellular dysfunction. Some of the new technologies also represent the highest form of personal-ized medicine, requiring the treatment to be highly tailored and specific to the patient’s genetic background, and often utilizing the patient’s own cells to create the necessary therapies. The term “regen-erative medicine” also includes exciting developments in the use of gene editing technologies to replace or correct genetic material with unprecedented precision.

A handful of regenerative medicine products have been approved in various countries around the world; many other new therapies are nearing the market, currently in mid- to late-stage clinical trials. We expect that several will enter the market within the next few years. (See Exhibit 1.)

These diverse examples are just a glimpse of the depth, breadth and

potential of the regenerative medicine industry. (Also see “Gene Therapies: Waiting To Emerge From The Bottle” – Scrip, September 6, 2016.) After decades of work – and some noteworthy early setbacks – the fields of cell therapy, gene therapy, tissue engineering and broader regenerative medicine are progressing through the clinic with great promise. As of mid-2016, we identified more than 700 companies working on regenerative medicines, and 728 clinical trials ongo-ing for such therapies, with 66 potential therapies already in active Phase III (or equivalent) late-stage clinical trials, almost doubling the count over the previ-ous year. (See Exhibit 2.)

Regenerative medicines represent a wave of innovation coming to the shores of our health care system that is approaching much faster than most realize. With the assistance of groups like the Alliance for Regenerative Medicine (ARM, www.alliancerm.org), policy mak-ers, payers, physicians and patients are

beginning to become familiar with the technologies involved and with the op-portunities and challenges facing their introduction to the market.

the sovaldi effectOne curative therapy outside the regenera-tive medicine area – Sovaldi (sofosbuvir) developed by Gilead Sciences Inc. for hepatitis C – has been in global headlines in recent years. Most of the headlines have been negative and have focused primarily on issues of price, pharmaceutical com-pany profits, health care costs and patient access. Noticeably less media – and po-litical – attention has been devoted to the clinical efficacy of Sovaldi or the fact that as a curative therapy it may also be cost-effective because of the prevention of the costly long-term consequences associated with hepatitis C.

Without debating the merits of the case here, the Sovaldi experience has un-doubtedly helped pour fuel on a broader fire raging against biopharmaceutical

Exhibit 1

on- or near-market regenerative medicines

Company/TreaTmenT IndICaTIon STaTuS

uniQure/GlyberaLipoprotein lipase deficiency (LPLD), a rare and often fatal fat metabolism disorder

Approved by the EMA in 2012. First approval of a gene therapy using adeno-associated viruses (AAVs)

Amgen/Imlygic MelanomaApproved by the FDA in 2015. First approval of a gene therapy based on oncolytic virus technology

Chiesi/HoloclarRepair corneas and restore sight in patients with burns to the eyes

Approved by the EMA in 2015. First approval of a tissue engineered medicinal product derived from stem cells

GlaxoSmithKline/Strimvelis

Specific form of severe combined immunodeficiency (ADA-SCID)

Approved by the EMA in 2016. First approval of a gene therapy based on ex vivo autologous retrovirus technology

Mesoblast & JCR Pharmaceuticals Co. Ltd./TEMCELL

Acute graft-versus-host disease in children and adults

Launched in Japan Feb. 2016

Spark Therapeutics/ SPK-RPE65

Gene therapy using AAV for a form of inherited blindness called Leber’s congenital amaurosis (LCA)

FDA submittal 2016; potential approval 2017

Kite Pharma/KTE-C19CAR-T cell therapy for advanced non-Hodgkin lymphoma

BLA filing early 2017; commercial launch anticipated 2017

Novartis/CTL019CAR-T technology for relapsed/refractory pediatric ALL

FDA submittal 2016; potential approval 2017

SouRCE: Alliance for Regenerative Medicine

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drug pricing and the growing costs of health care. In doing so, it may have also unintentionally tainted the optimism and excitement that should be attached to the development of curative therapies, and caused policy makers to fear that the new era of regenerative medicine represents an era of Sovaldi-sized problems.

We are concerned that political rhetoric may turn into broad policy and legislation that may fail to recognize the uniquely high value of curative regenerative medicines and that may instead inadvertently create significant impediments to their funding, development and adoption.

Against this backdrop, it is therefore critical for major stakeholders in the emer-gence of curative regenerative medicines to engage on the following key issues:

•What lessons can the health care system learn from past experience with other curative therapies such as Sovaldi?

•In what ways will the coming wave of regenerative medicines be different from Sovaldi?

•How should the value of curative therapies be measured and benefits distributed among major stakeholders?

•Do health care systems around the globe need to change their policies to accommodate curative therapies and if so, how?

•How can innovators in the biopharma-ceutical industry be better partners to the stakeholders involved?

This article – as well as planned subse-quent papers – is an early effort of ARM to help frame the opportunities and the challenges of potentially curative gene and cell therapies and to spark a con-versation about specific policy proposals that will benefit patients, the health care system and ultimately, society.

what is a Pound of cure worth?Many stakeholders will intuitively ap-preciate the uniquely high value of potentially curative therapies. However, any detailed discussion about the value of biopharmaceutical innovation is fraught with challenges. This is true for so-called conventional therapies that are admin-istered – and paid for – chronically over time (potentially over the lifetime of a patient). It is also equally if not more chal-lenging when trying to articulate the value of potential curative therapies that may be administered only once or a few times.

Part of what makes such a discussion challenging is that there is no universally accepted or standardized methodology to assess the value of biopharmaceutical innovation across advanced economies with nationalized single-payer health care systems, or even across public and private payers within fragmented multi-payer health care systems like the US.

There have been commendable recent efforts by various groups to attempt to develop new frameworks to evaluate the value of biopharmaceutical products. Such efforts include the American So-ciety of Clinical Oncology (ASCO) Value Framework, the Institute for Clinical and Economic Review (ICER) Value Assessment Framework and the Memo-rial Sloan Kettering Cancer Center’s DrugAbacus project, as well as numerous tools developed by for-profit firms. (Also see “Drug Pricing: With “Value” Debate In Full Swing, ICER’s Influence Grows” – In Vivo, November 2, 2016.) However, even these attempts have been criticized and are at odds with each other, and none of them formally address unique attributes of potentially curative therapies that should contribute to an appropriate as-sessment of their value.

We therefore lack a common vocabu-lary even to begin a conversation about the value of curative therapies. And yet, it is critically important for policy makers to begin to understand all the ways in which potentially curative regenerative medicine therapies may represent value for money. We introduce here a simple framework with four distinct categories to describe the potential value of regen-erative medicines. (See Exhibit 3.)

1. Clinical Impact: In part because of the nature of the technologies involved, such therapies may have a transforma-tive impact on the underlying diseases at many levels. The impact of curative regenerative medicines may be felt in different ways:

•Quality of the effect. Conventional therapies often manage the symptoms of the disease, whereas regenerative medicines have unique mechanisms of action that may target the underly-ing cause of the disease. For example, many gene therapies directly target the underlying genetic defect lead-ing to the disease in a manner that other therapeutic modalities cannot, enabling treatment of previously un-treatable conditions.

•Magnitude of the effect. As a result of their mechanism of action, curative therapies may not only halt but even

Exhibit 2

Gene and cell therapy clinical trials

of current clinical trials are in oncology

of current clinical trials are in cardiovascular

+40%

12%

Ph. I: 223Ph.II: 439Ph.III:66

728clinical trials

{Gene And Cellular Therapies And other

Regenerative Medicine Products:


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reverse disease manifestations, that could significantly decrease disease morbidity and extend lifespan.

•Duration of the effect. Conventional therapies often need to be administered chronically to be effective. Conversely, curative therapies often aim to treat the patient with a single intervention or a series of interventions with long-term and even potentially lifetime impact (a phenomenon sometimes referred to as “one and done”).

2. Quality of Life: Increasingly important to patients, physicians and payers is not just extension of life, but also improve-ment in objective health-related quality of life (HR-QOL) measures and other patient-reported outcomes (PROs). The impact of curative regenerative medicines may be felt in different ways:

•If curative therapies live up to the expectations for high clinical impact as described earlier, commensurate

improvements in patient QOL are to be expected, as has been already demon-strated in other curative settings (e.g., stem cell transplantation).

•Patient QOL may benefit from the ability to discontinue chronically administered therapies that are often inconvenient and may require frequent travel to spe-cialist locations.

•Improvements in QOL may not be re-stricted to patients, but may also extend to other caregivers involved, depending on the disease.

3. Health Care System Cost Savings: Curative therapies have the potential to offset significant costs to the health care system. The impact of curative regenerative medicines may be felt in different ways:

•Averting the costs associated with the downstream complications of disease progression and complications includ-

ing hospitalizations, especially for diseases without existing therapies.

•Eliminating or replacing the direct costs of existing chronically administered therapies.

•Eliminating the downstream costs as-sociated with the side effects of existing chronically administered therapies.

•Eliminating the significant costs of non-compliance with conventional thera-pies, as well as the costs of programs to encourage compliance.

Based on ARM analysis, the current pipeline of regenerative medicines as described earlier are indeed addressing some of the costliest disease areas and conditions currently driving US health care costs. (See Exhibit 4.)

4. Societal Benefits: Societal benefits are often underappreciated in the evalua-tion of the value of new therapies. The


clinical

• Address underlying cause of disease

• Stabilize or reverse organ dysfunction

• Halt disease progression

• Decrease morbidity

• Increase survival

health-related QUalitY oF liFe

• Improve patient-reported outcomes

• Improve overall sense of physical and psychological well-being

• Eliminate or reduce need for chronic therapy

• Improve functional abilities

health care costs

• Avert future costs of standard-of-care, including chronic therapies

• Avert costs of future complications of disease

• Avert future costs of non-compliance and waste

societal

• Increase work productivity

• Reduce absenteeism

• Find employment and contribute to family and society

• Avert secondary impact on caregivers

BENEFITS

Exhibit 3

curative regenerative medicine Benefits

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impact of curative therapies may be felt in different ways:

•Increased productivity and reduced workplace absenteeism for patients.

•Employment for patients who previ-ously have not been able to work.

•Reduced burden on caregivers of patients.

While the broad categories of value described are not unique to regenerative medicines, what is unique is the incre-mental benefit expected over and above what can be achieved with conventional therapies across a patient’s lifetime, and the potential ability to generate such long-term benefit with a single or a limited number of applications of therapy.

There is a slowly growing but encour-aging body of evidence that some payers and health technology assessment bodies globally are beginning to recognize the potential value of regenerative medicine, and the need for change:

•Private and public payers interviewed for a study commissioned by the Cali-fornia Institute of Regenerative Medi-cine (CIRM) in 2009 acknowledged that potentially curative therapies would be paid for in the near term with premium increases, “although the premiums would be reduced if the curative treatments generate long-term cost savings.”

•In the UK, the field of regenerative medicine was elevated to one of “Eight Great Technologies” that will propel future growth. As part of an assess-ment of the impact of regenerative medicines in 2013, the UK government also expressed the need “to devise suitable models that give appropriate consideration to the long-term savings sometimes offered by high up-front cost [regenerative medicine] treat-ments.”

•The UK’s National Institute for Clini-cal Excellence (NICE) health technol-ogy assessment (HTA) organization published in 2016 a formal review of its models as applied to potentially

Exhibit 4

selection of conditions targeted By cell and Gene therapies

dISeaSe area

eSTImaTed annual CoST of dISeaSe area To

uS eConomy

SeleCTIon of IndICaTIonS TargeTed by Cell and gene

TherapIeS

Musculoskeletal >$874bn

Wound care, neuropathic pain, stress urinary incontinence, osteoarthritis, cartilage defects, spinal disorders, avascular necrosis, bone fracture and other rare genetic muscle disorders

Cardiovascular >$316bn

Congestive heart failure, ischemic stroke, critical limb ischemia, ischemic heart disease, peripheral artery disease

Central Nervous System (CNS)

>$245bn

Spinal cord injury, ALD, multiple sclerosis, Friedreich’s ataxia, neuro-muscular disorders and various neurological conditions including Alzheimer’s disease, Parkinson’s disease, Huntington’s disease, etc.

ophthalmological >$139bnInherited eye diseases, blindness, corneal transplantation

oncology >$124bn

Renal cell carcinoma, mesothelioma, prostate cancer, head and neck cancer, nasopharyngeal cancer, non-small cell lung cancer, ovarian cancer, leukemia, lymphoma, skin cancer, brain cancer, hematologic malignancy, graft vs. host disease, cytomegalovirus infection due to malignancy

Inherited Blood Disorders

>$7bnSickle cell disease, hemophilia A & B, beta thalassemia


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curative cell or gene therapies, and determined that “where there is a combination of great uncertainty but potentially very substantial patient benefits, innovative payment method-ologies need to be developed to man-age and share risk to facilitate timely patient access while the evidence is immature.”

•A 2016 publication by Eric Faulkner et al. provides summaries of surveys of US managed care payers and physi-cians, illustrating that roughly 30% think regenerative medicines will be transformative and about 60% felt that a regenerative medicine therapy that permanently cured a disease could merit a significant (>50%) increase in payment over existing alternatives.

Although these are encouraging early signals, recent history suggests that stakeholders may not automatically understand all the sources of value asso-ciated with biopharmaceutical products, and that they tend to focus on price, cost and budget impact. It is therefore critical that regenerative medicine innovators engage in the public discourse on this topic and help inform payers and policy makers.

even if You Build it, They May Not ComeAcknowledging the potential value of curative regenerative medicines is an important first step. However, it is equally important to acknowledge the potential challenges such therapies may pose to the current health care system, which may in turn introduce undesirable barri-ers to their adoption to the detriment of patients in need.

A preliminary assessment by ARM has identified several potential challenges that fall under four categories:

UncertaintY•While gene and cell therapies have been

under development for three decades and have been studied in thousands of patients, we must acknowledge that their successful clinical application is still a fairly recent phenomenon. Regula-tory approvals are sparse and real-world experience is limited.

•For some diseases, it may be decades before we know if the clinical impact has been as profound and as durable as hoped for at the time of regulatory approval.

•Stakeholders therefore may feel they have no guarantee the products will live up to their promise, which may encour-age a “wait and see” approach to adop-tion, to the detriment of patients.

economic disincentives•There is an inherent disconnect be-

tween the timing of payment for poten-tially one-time curative medicines and the savings to the health care system that may result, but that may only be realized over decades after the therapy is administered. Current insurance coverage policies, mechanisms and economics are not designed to consider the benefits of particular interventions over a long period of time. Most health coverage policies address the costs of patients on an annual basis and are not structured to take into account offsetting benefits of specific therapies that are realized outside of this annual window. This concern is exacerbated in more fragmented health care systems, as is the case in the US, where patients move around between plans over time and may only be with any given plan on average for two to three years.

•Some regenerative medicines may rep-resent cures for serious and progres-sive diseases such as congestive heart failure, Alzheimer’s disease or diabetes that affect large populations waiting for better alternatives. Approval of such therapies may create extreme near-term budget impact issues for public and private payers driven by high and acute demand that cannot be covered by temporary, incremental premium increases.

•The US health care system is already shifting a higher burden of cost-sharing onto patients in the form of higher deductibles and co-pays for their thera-pies. Patient co-pays that are set as a percentage of potentially high one-time price may be prohibitively expensive for patients seeking curative therapies.

ProdUct comPlexitY•Some regenerative medicines – particu-

larly ex vivo autologous therapies that in-volve the extraction and manipulation of patients’ own cells – are highly complex and involve different procedures sepa-rated over time, care settings and even geography, which may challenge health care systems that are set up around more conventional therapies.

•New technologies may cut across tradi-tional boundaries. Something that was previously not considered a product or device (e.g., a patient’s own cells) may become so with specific manipulation. There may not be adequate frameworks to value and reimburse such therapies.

•Payment codes may simply not ex-ist to represent payment for the full spectrum of product, materials and processes used to deliver a cell or gene therapy, and creating and introducing new codes may be more difficult than for more conventional medicines.

reimBUrsement ParadiGms•Health care systems are generally not

configured to pay for new products in a manner other than a price per unit (vial, treatment, procedure), exac-erbating the divergence in timing of product cost and benefits generated by the product for one-time therapies.

•There may be legal or statutory bar-riers – such as specific coverage or payment rules set by CMS – that pose reimbursement challenges for regen-erative medicine products.

While no single barrier on its own may be problematic, the totality of these considerations may create challenges for stakeholders and policy makers, impeding coverage, coding, valuation, reimbursement and, ultimately, adoption of regenerative medicines.

Toward a New ParadigmThere is a growing crescendo of proposed solutions to address some of the potential barriers associated with curative regen-erative medicines. (See Exhibit 5.) Based on our early assessment, most proposals focus on alternative reimbursement and/

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or financing models, and are intended to address the potential uncertainty and economic disincentives that may be as-sociated with curative therapies.

•Risk-sharing agreements: An agree-ment between payers and innovators to ensure that payers’ exposure is lim-ited or eliminated if a patient fails to respond to an expensive regenerative medicine.

•Value -based contracting: Also known as “pay-for-performance,” an agreement between payers and innova-tors that ties the amount of payment provided to the degree of value realized (clinical, economic or other).

•Annuities: An agreement between the innovator and the payer to spread payments over time to reduce the cost intensity of potentially expensive one-and-done curative therapies. This could be combined with risk-sharing agreements or value-based contracting as described to also include a perfor-mance component.

•Re-insurance: A financial arrange-ment that limits insurers exposure to the risk of an expected volume of high-cost procedures. Re-insurance was successfully introduced and adopted to address high-cost solid organ and stem cell transplantation procedures.

•Payer financing: Lease-like financing provided by makers of expensive medi-cal imaging equipment to hospitals. Financial intermediaries could provide similar loans to payers to address situations where there is an issue of near-term but temporary budget afford-ability in response to the approval of a new cure.

•Consumer health care loans: Mort-gage-like financing provided by fi-nancial intermediaries that allow consumers to take out loans to finance large co-payments or possibly to pay outright for cures in situations where there is inadequate coverage.

•Co-payment reform: Reconsideration of coverage for out-of-pocket expenses

incurred by patients who have to travel to centers of excellence for highly specialized curative therapies and that may involve long stays for families near such centers.

There has been a tendency to jump to a particular solution from this list of proposals as the silver bullet that will address all or most of the potential bar-riers associated with regenerative medi-cines. Pay-for-performance and annuity models appear to generate particularly high levels of support. We believe that it is still too early – and ultimately may not be helpful – to try to pick any one proposed solution. The health care sys-tem may need to be prepared to adopt multiple solutions that are tailored to the specific attributes of the disease and regenerative medicines involved, and to the preferences of the local health care system. In addition, what is still missing is a comprehensive inventory of such so-lutions, supported by rigorous analysis, modeling and weighing of the pros and cons from the perspective of different stakeholders. This work is critical, and has been prioritized by ARM and others.

reason For hopeAlthough most discussion of curative therapies today focuses on the experience with Sovaldi, less attention is paid to the fact that the global health care system has already been working with curative therapies for more than three decades in the form of solid organ and stem cell trans-plantation procedures. These procedures were – and are still today – among the most expensive medical interventions (a Milli-man research report from 2014 estimated average billed charges for heart transplants and allogeneic stem cell transplants at around $1 million per procedure). At the time of their introduction, there was a considerable amount of technological and clinical uncertainty related to utilization and long-term outcomes. There was also concern then about the ability of the health care system to absorb the costs of these procedures. Re-insurance was success-fully introduced as an alternative model to address issues related to uncertainty and affordability. This pairing of medical and financial innovation has allowed the field of transplantation to flourish over the decades and to benefit millions of patients across the globe facing life-threatening

Exhibit 5

alternative models


Primarly intended to address uncertainty

Primarly intended to address affordability

Alternative Reimbursement models

alternative Financing models

supplier credit (for payers)

Bonds (for governments)

Consumer Health care loans (for individuals)

cost sharing Agreements

risk sharing Agreements

value-Based Payments

cure Pools

reinsurance

license Fee

annuities

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❚About ARM

The Alliance for Regenerative Medicine is the largest single advocacy organization dedicated to the emerging field of regenerative medicine. ARM was established to support a dialog between the developers of transformational new therapies and policy makers at all levels, with the goal of increasing awareness about these new therapies and their potential benefits and costs, as well as generating and evaluating potential policy solutions to appropriately enable access for patients that address the needs of all key stakeholders.

ARM encourages a productive discussion on these critical topics with patients, public and private payers and other stakeholders as we work together to identify and promote solutions that will ensure potentially life-transforming technologies become widely accessible and adopted as and when their promise is realized.

ARM also partners with representatives from other organizations engaged in multi-stakeholder initiatives to prepare the health care system for curative and/or regenerative medicines. (See Exhibit 1.) These include the Biotechnology Innovation organization (BIo), the International Society for Cellular Therapy (ISCT), the National Marrow Donor Program (NMDP), the NEW Drug Development ParadIGms (NEW-DIGS) program at the Massachusetts Institute of Technology (MIT), the American and European Societies for Gene and Cell Therapy (ASGCT and ESGCT), the International Society for Stem Cell Research (ISSCR), and the Tissue Engineering and Regenerative Medicine International Society (TERMIS), among others.

multiple regenerative medicine stakeholders


Payers and health tech Assessment

orgs

Patients, Families and

advocacy orgs

Physicians, hospital

Systems and medical

societies

Policy makers

Financial services and reinsurance Companies

regenerative medicine

innovators and trade orgs

health Economists

and Academia

regulatory agencies

CuraTIve regeneraTIve

TherapIeS

multi-stakeholder dialogue

Participants

conditions. There are many lessons to be learned from this experience that may have parallel applications to the coming wave of regenerative medicines.

conclusionsRegenerative medicine, including cell and gene therapy and other similar advanced therapy products have already begun to demonstrate the potential to deliver on their promise to treat or cure a range of diseases. The pipeline of such therapies is robust. The potential social, clinical and economic value of these treatments is significant and may require a serious rethink of the current focus on costs and price. It is critical to ensure successful de-velopment of these products by creating a reimbursement environment that rewards innovation when value is demonstrated or can be reasonably anticipated.

Getting there will not be straightfor-ward. There are complex issues to be discussed, barriers to be confronted, solutions to be considered and even some societal choices to be made. This will likely require a uniquely broad coalition of diverse stakeholders working together proactively and productively years in ad-vance of this wave of innovation.

This is the first of a series of papers pre-sented by ARM and its member organiza-tions in the US and EU that are intended to support the necessary dialogue. (See side-bar, “About ARM.”) Subsequent reports will describe the potential reimbursement barriers as well as assess the potential solutions to the challenges described in this article with far more rigor. This work will culminate in specific policy propos-als and recommendations for legislative change that may be necessary to unlock the full potential of curative regenerative medicines. Society – and innumerable patients like Emily Whitehead in need of life-saving regenerative medicines – will judge us on our success. Iv004955

Faraz Ali ([email protected]) is Chief Business Officer, REGENXBIO, Ted Slo-comb ([email protected]) is VP, Commercial Planning, Audentes Thera-peutics and Michael Werner ([email protected]) is Executive Director of the Alliance for Regenerative Medicine and a Partner at Holland & Knight LLP.

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om❚ Real-WoRld eVIdence

Getting an innovative new drug to patients and convincing payers to pay a good price is no easy feat, as pharma companies know. Real-world evi-dence has for some time been touted as a remedy for quicker approvals, better discussions with payers and flexible reimbursement agreements. Even though advances in digitization mean that data are potentially

much more accessible, real-world evidence has yet to fulfill its promise. A lack of trust in what will happen to patient data, poor approaches to market access and concerns over whether the data are fit for purpose are just some of the challenges in Europe.

Cash-strapped payers are balking at the prices of many pharmaceuticals and think-ing hard about whether they want to pay. Real-world evidence originating from, for example, patient registries, electronic health records, claims data or observational cohort studies is likely to become an increasingly important means of proving the value of medicines to payers. Janssen Pharmaceuticals Inc.’s Nigel Hughes, scientific director, RMEDS (real-world evidence, medical affairs, established products, statistics), believes RWE makes good business sense. “Understanding real-world experience and outcomes is critical to ensuring we provide safe, efficacious products to our patients in any given market … and getting excellent outcomes for patients and demonstrating the real-life value of those outcomes to stakeholders is key to the firm’s business suc-cess,” he says. “RWE offers the possibility of gaining greater insights into potential opportunities for new products, and/or product extensions, service development and cost efficiencies, including study optimization,” he adds. Service development and “attuned approaches” to a common understanding of how to re-engineer health care provision of efficacious products are further possibilities,” he adds. (Also see “Q&A: Janssen on where it is heading with real world evidence” – Pink Sheet, October 20, 2016.)

RWE has been around for some time supplementing marketing authorization applica-tions and pricing and reimbursement files. Although no silver bullet, Anke van Engen, a

Real-World Evidence And The Quest For European Market Access

RWE

Real-world evidence promises to solve

many problems inherent in getting

a drug to patients at a good price. It

could slash development costs and

help make the reimbursement case

to payers. But there are challenges

for companies that want to exploit

real-world evidence to get their drug

to patients in Europe.

Real-world evidence has the potential to help companies get drugs to patients more quickly by altering pharma’s R&D paradigm.

RWE is likely to become a more important means of proving the value of medicines to payers, thus improving the odds of getting reimbursement.

Adoption has been slow, but increased digitization of real-world data sources should encourage more usage.

Pharma companies face a number of challenges in successfully exploiting RWE, such as poor data quality and security concerns.

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principal at QuintilesIMS, says that RWE does improve the probability of winning reimbursement. “An analysis using data in our HTA Accelerator platform showed that inclusion of RWE in France was as-sociated with higher benefit ratings,” she says. Meanwhile, in England, the health technology assessment (HTA) body, the National Institute for Health and Care Excellence (NICE) recently changed its mind and decided to recommend John-son & Johnson’s Zytiga (abiraterone acetate) for chemotherapy-naïve meta-static castration-resistant prostate cancer patients after J&J presented real-world evidence from US insurance claims data.

The promise of future real-world evidence is also an influencing factor on decision making. Many managed entry agreements or risk sharing deals in Eu-rope rely on the gathering of real-world data (RWD). In France, for example, Cel-gene Corp.’s Pomylast (pomalidomide) for multiple myeloma is reimbursed under a risk sharing scheme, which will see the company repay the cost of the drug if the patient does not respond to treatment. Payers were uncertain about whether a modest extension of progression-free survival would translate into much benefit in the real world. Risk sharing schemes are also common in Italy to secure reimbursement of cancer treatment, and registries track outcomes. In Spain, Catalonian authorities are ex-perimenting with managed entry agree-ments that will rely on data gathered from registries. England’s Cancer Drugs Fund essentially offers conditional reimburse-ment for expensive cancer drugs backed by limited evidence, and the gathering of real-world data can make up part of the evidence package for companies wanting to prove their case. Sweden’s HTA, the TLV, takes a value-based pricing approach. “The price has to reflect the value created when the pharmaceutical product is used. That means that real-world data directly or indirectly showing the value of the use of a product is of large interest to TLV,” says Niklas Hedberg, the TVL’s chief pharmacist.

The salford exampleDigitization and the advance of electronic health records makes the analysis of real-world data easier as sources become less

difficult to mine. Sweden’s TVL says the advance of digital records there has been a very important development. However, digitization is moving at different speeds across Europe. The UK has so far made the greatest strides, while progress has also been made in the EU5, the Nordic countries and other markets, includ-ing Estonia. GlaxoSmithKline PLC’s groundbreaking Salford Lung Study was only possible because Salford, in Greater Manchester, UK, was a “truly paperless” center that had had for some time an integrated e-health record system shared between primary and secondary health care, says David Leather, MD, GSK’s glob-al medical affairs leader in the respiratory franchise, who led the UK-based study. (Also see “Real-World Evidence: Lessons From GSK’s Salford Lung Study” – Pink Sheet, September 9, 2016.)

This study, which began in 2013, is the first ever prospective randomized control trial (RCT) in an everyday health care setting. It set out to compare the effective-ness of Relvar/Breo Ellipta (vilanterol/fluticasone furoate in a dry-powder in-haler) with existing therapies for COPD and asthma over a 12-month period in a real-life setting. To ensure patients expe-rienced a minimum of interference from the trial, data were gathered from elec-tronic health records that were updated every time a patient within the trial came into contact with the health care system, including general practice, attendance and emergency center (A&E), pharmacy and out-of-hours services. The study was open label and had a broad population of eligible patients with minimal exclusion criteria, ensuring the population was much more representative of the patients who would take the medicine in real life. Results from the COPD arm showed a sig-nificant 8.41% lower rate of exacerbations between Relvar and the standard of care (p = 0.025). GSK will release results from the asthma arm in 2017.

GSK’s twice-daily inhaled corticoste-roid/long-acting beta-agonist inhalers Advair/Seretide (fluticasone/salmeterol) are facing generic competition and the company will be keen to see patients moved on to Relvar. According to Leather, the firm hopes that the Salford Lung Study will positively inform payers, guideline writers and clinicians. However, the jury

is still out. As Leather explains, GSK is the first company to produce such evidence. “A lot of people were unsure what the data would look like, but now we have a quality analysis of a substantial database that is now with groups like regulators and guideline writers. Their evidence hierarchies don’t include this type of evidence and now they have a data set they can make sense of and decide what it means.” He believes the study is an evolution rather than a revolution in the development of real-world evidence that will help the field move forward. “It isn’t just about what the industry produces. It is also about the value people ascribe to it; people haven’t had the chance to evaluate data like this because it has so far not existed. There has been massive interest and I think it is going to trigger an evolution in thinking. That won’t just be driven by industry but also by the people who receive the information and make sense of it.”

Beyond effectiveness, the Salford Lung Study is also important because it aims to show payers what financial impact the drug may have on the health system. GSK is gathering health care resource utiliza-tion data, which tracks costs for health care authorities. The findings will be published at a future scientific meeting, according to the company. The firm says it is the first company to produce such evidence and that it hopes it will offer a “wealth of information” on disease management to help decision makers. Such data could be incredibly powerful and could highlight savings made else-where in the health system, says Marie Kane, chief operating officer of NorthWest EHealth, which developed the technology platform necessary for the Salford Lung Study. “If a company has a new antibiotic that was incredibly expensive, it would want to show that actually by using that expensive antibiotic at a certain point in the care, the system would actually save money.”

new r&D Paradigms?The regulatory burden that companies developing innovative drugs face is a big one, and the R&D model is fast becoming unsustainable. The path to authorization is expensive and often lit-tered with failures, whereas randomized

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controlled trials, the gold standard for gathering the necessary data, are costly and time-consuming. But with real-world evidence, there is potential to do things differently, resulting in lower costs and earlier approvals. The sooner a drug is ap-proved, the sooner it can start to recoup investment and make a profit, and while the drug is on the market, it is protected by a patent, says Kane. She believes that a trial like the Salford Lung Study, a late Phase III trial, could actually be done at late Phase II. “It would give companies the capacity to sail sooner, and therefore not waste as much money. I think it would potentially enable adaptive trial design because you are getting the data in an almost live format. You can do monthly reviews of data logs to see what is hap-pening with outcomes.” Kane points to the possibilities in oncology: “If group A of patients with this particular phenotype is responding to drug A, but group B with a different phenotype isn’t, you could take group B off the drug and keep group A on it. This potentially could shorten the whole trial lifecycle and therefore get your drug to market quicker.”

Faster approval means fewer develop-ment costs, which could lead to a price that is more attractive to payers. Rafaat Rahmani, CEO of Lifescience Dynamics, believes that in the not so distant future companies will invest less in RCTs and think about alternative research para-digms, with a number of drivers forcing them to think differently. Companies want to get to the market quickly, he says. “The first, second and third to market products are the ones that share the market, the fourth or fifth tend to have a small market share, so the earlier you get to market, the better overall.” It is early days, but the potential for real-world evidence to drive change in R&D is acknowledged by dif-ferent authorities and already initiatives featuring elements of real-world data collection are underway. For example, the European Medicine Agency’s Adaptive Pathways is a “concept” for developing medicines and generating data in order to allow patients earlier access to innova-tive medicines, largely in areas of great medical need where traditional means of collecting data would be difficult. (See sidebar, “RWE: The EMA’s View.”)

strategies May shift To really harness the power of real-world evidence, some companies may need to think differently and take a second look at their internal structures. Hassan Chaudhury, chief commercial officer at UK-based data consultancy Health iQ, believes that the marriage between mar-ket access and RWE is not as mature as it should be. Part of the problem, he says, is that some companies understand market access better than others. Whereas some think of it as simply getting a product on a formulary, others see it as a bigger pro-cess in which all functions in a company are aligned, and as an opportunity to create a better environment in which to sell. In addition, many company teams, he says, work in isolated silos. Market access should touch all functions in a company, including real-world evidence. He believes that a combination of GSK, which has an “excellent” approach to RWE with its own specialized in-house team, and Roche would be a good model. The Swiss firm operates an integrated franchise committee that ensures all the different teams working on a brand, including health economics outcomes research, market access and research, are all aligned and unified on what they are trying to achieve for the brand.

Meanwhile, QuintilesIMS’ van Engen thinks that every company should have an RWE strategy that should span a prod-uct’s entire lifecycle and that should “an-ticipate stakeholder needs.” (See box.)

numerous challenges remainEven with a good strategy in place, com-panies will face numerous challenges. RWE studies can be expensive – the Salford Lung Study cost GSK around £80 million to conduct, which it says is broadly in line with the cost of a large traditional RCT. Many companies will be reluctant to spend this amount of money and will try to use existing real-world data sources. But most sources of RWD are not collected for research purposes, which means data quality is an issue. In addition, methods of addressing data gaps and inconsistencies are not yet widely accepted for statistical validity. It is therefore not surprising that HTA bodies can be slow to accept evidence from real-world sources. “Randomized

❚ QuintilesiMs’ RWe stRategy, nine Key tips

1. Start planning early on in late Phase II or early Phase III.

2. Simultaneously set up a cen-tralized, but locally informed, decision-making and funding process for real-world research. A purely centralized process may miss critical local needs. A highly localized process can be inefficient and less impactful.

3. Because treatment land-scapes and payer needs change, firms must also re-evaluate the process at every development milestone.

4. Start with “insight gen-eration,” which includes under-standing what data are needed and when, how its value is defined and how it will be used.

5. When the research question is clear, the next step is an evalu-ation of real-world data sources to enable the elaboration of the research approach.

6. Don’t try to fill every gap in the evidence. And be aware various levels of evidence are required for impact.

7. Get input from the external stakeholders in key countries to ensure the plan can be imple-mented both at a global and local level.

8. Prioritize biggest concerns expressed by external stake-holders.

9. Consider using a range of study designs from surveys to pragmatic trials for greater impact on decision makers, in-cluding regulators, payers, pro-viders, prescribers and patients. No single study is sufficient to address a priority issue.

Source: Anke van Engen, a principal at QuintilesIMS Consulting Services

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control trials are always our gold stan-dard, other types of evidence serve to supplement this,” says NICE. “The prob-lems of confounding, lack of blinding, incomplete follow-up and lack of a clear denominator and end point occur more commonly in non-randomized studies and non-controlled trials than in RCTs,” the institute says in its methods guide for technology appraisals.

Sweden’s TVL finds that selection bias is a problem and is calling for solutions,

say Hedberg. He also advises companies to correlate RWD to a baseline to show a value for the health development of the standard population, and respond to questions relating to pricing and re-imbursement. Early planning and early dialogue with stakeholders is key to make sure companies get their approach right. Data validation can be a big task, but a good analyst will ensure it is robust, says Lifescience Dynamics’ Rahmani. “You need to say how the data were captured,

❚ RWe: the eMa’s VieW

The European Medicines Agency believes that real-world evidence is important for making many decisions about a medicine. It helps support pharmacovigilance activities and the assessment of safety signals, and it can also help measure the impact of any regulatory measures undertaken, says the agency. Such evidence also enables a better understanding of a medicine’s risk-benefit balance and its effectiveness as well as informs HTA and health care utilization decisions. These activities apply to a wide range of medicines, including authorized medicines, innovative medicines, orphan medicines and medicines included in Adaptive Pathways. The agency says it sees a wide range of RWE collected from numerous sources, including e-health records, registries, hospital records and insurance data. Meanwhile, data from biobank, genomic and digital phenotyping information are increasingly being integrated into real-world evidence data sets.

Nevertheless, regulators face a number of difficulties that impact their ability to access and analyze real-world data. According to the EMA, these include:

• fragmentation and lack of interoperability of resources• governance issues• privacy concerns• inadequate use of methods for integrating and analyzing

heterogeneous data• underuse of technological advances• a lack of cross-border collaborations and sustained funding

mechanisms for securing access to real-world data and then for analyzing it

It is therefore not surprising that the agency is calling for a “frame-work that provides the EU regulatory network with access to and analysis of an extensive range of multinational real-world data.” This framework, says the EMA, should involve the development of “sustainable multi-stakeholder governance and funding mecha-nisms; a comprehensive characterization of EU-wide sources of real-world evidence; and identification or development of methods to integrate and analyze data and collaboration across stakehold-ers and borders.”

show whether there was any opportunity for error, alteration, bias or to manipulate the data.”

Van Engen suggests hybrid designs, for example using retrospective data to inform the design of a prospective real-world study. Chaudhury points to the analysis of Hospital Episodes Statistics (HES), available in England, which he says is one of the best data sets in the world. The data track hospital admis-sions and gives detailed information such as the reason for admission, the length of stay, and whether the patient was admit-ted to A&E. With these data it is possible to point to trends and have a discussion, Chaudhury says. For example, a company might show a payer HES data analysis re-vealing that COPD admissions are going up alongside prescribing data that show prescriptions of a certain COPD product are falling. “This is not a study, this is a trend. But that is what you can do with real-world data, you show what is hap-pening to really drill down, and based on that information, you can do clinical tri-als or a study or an audit. The real world is about touch points and clinicians like evidence from sources that they can see.”

Trust is another issue. Janssen’s Hughes points out that people will do-nate organs but are more reticent about sharing personal data. “The industry has been challenged in terms of trust and perception with the general public. I can understand that; we haven’t exactly covered ourselves in glory in the past.” He says the solution is for companies to be open, honest and transparent about anything they are proposing to do and be very clear about the intended use. Hughes believes that industry, regula-tors and the general public need a much broader debate about how technology is changing the world. “All sorts of stake-holders need a say in how we manage and access this data for the better for society. I don’t just mean about new drugs but how we can manage disease better, or see if there are better ways of managing it.” IV004954

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❚ On the MoveRecent executive appointments in the life sciences industry

❚ Jeremy BartonCMO, eFFECTOR

❚ Lori ChmuraCEO, Dune Medical Devices

❚ martin DuvaLLCEO, Tocagen

❚ John ForDCEO, Enterprise Therapeutics

❚ Steve haayenArea VP, Sales, Western US

Spinal Elements

COMpaNy CHaNgEs

aDSett, roger To: Insmed Inc., Chief Commercial

Officer (September) From: Shire PLC, VP, Head,

Gastrointestinal & Internal Medicine Phone: 908-977-9900

arenS, holger To: Biolase Inc., VP, Managing Dir.,

EMEA (September) From: Consultant Phone: 888-424-6527

Brennan, Daniel To: Edge Therapeutics Inc.,

COO (October) From: Insys Therapeutics Inc., EVP, COO Phone: 800-208-3343

Chen, Jenny To: Cytovance Biologics Inc.,

CFO (October) From: Maxcess International,

Corp. Controller Phone: 405-319-8310

CoBB, Paula K. To: Decibel Therapeutics, SVP,

Strategy, Portfolio & Programs (September)

From: Biogen, SVP, Rare Disease Group Phone: 617-370-8701

DuLaC, emmanuel, PharmD, PhD To: Alnylam Pharmaceuticals Inc.,

SVP, Chief Commercial Officer (September)

From: Shire PLC, SVP, Head, Rare Disease Phone: 617-551-8200

DuvaLL, martin To: Tocagen Inc., CEO (November) From: Ariad Pharmaceuticals Inc.,

EVP, Chief Commercial Officer Phone: 858-412-8400

FayaD, Wael To: Enumeral Biomedical Holdings Inc.,

Chmn., Pres. & CEO (September) From: Forest Laboratories Inc.,

Corp. VP, Global Bus. Dev. Phone: 617-945-9196

ForD, John, PhD To: Enterprise Therapeutics Ltd.,

CEO (October) From: Metrion Biosciences,

Co-owner & Investment Dir. Phone: +44 1273 2346673

GoLDBerG, michael m., mD To: Navidea Biopharmaceuticals Inc.,

Pres. & CEO (September) From: Montaur Capital Partners,

Managing Partner Phone: 614-793-7500

Gorman, James, mD, PhD To: Agenus Inc., VP, Strategic Planning

& Portfolio Mgmt. (October) From: BioAssets Development Corp.,

Co-founder & CEO Phone: 781-674-4400

GreenStreet, yvonne To: Alnylam Pharmaceuticals Inc.,

EVP, COO (September) From: Pfizer Inc., SVP, Head,

Medicines Dev. Phone: 617-551-8200

haayen, Steve To: Spinal Elements Inc., Area VP,

Sales, Western US (October) From: The Medical Memory, VP, Bus. Dev. Phone: 877-744-6255

❚ JameS GormanVP, Strategic Planning & Portfolio

Management, Agenus

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❚ Jeremy BartonCMO, eFFECTOR

❚ roBert (ChiP) hanCeDirector, Vivasure Medical

❚ raLPh LiPPVP, CSO, Noven Pharmaceuticals

❚ marK PLavSiCCTO, Lysogene

❚ KimBerLy StePhenSCFO, Appili Therapeutics

ivarSSon, magnus, PhD To: Rodin Therapeutics Inc.,

VP, Head, Discovery (September) From: Proteostasis Therapeutics Inc.,

VP, Head, Translational Science Phone: 617-588-2600

JaSKie, Suzette To: Corindus Vascular Robotics Inc.,

VP, Global Medical Affairs (October) From: MedAxiom Consulting, Pres. &CEO Phone: 800-605-9635

KoLLenDer, richard To: Rapid Micro Biosystems Inc.,

CBO & CFO (September) From: Quaker Partners, Managing Partner Phone: 978-349-3200

Lee, David K. To: Shire PLC, Head, Global Oncology

Franchise (October) From: Baxalta Inc., Dir., Strategy & Ops.,

Oncology Phone: 617-349-0200

Lee, John J. To: Decibel Therapeutics, SVP,

Pharmaceutical Dev. (September) From: Infinity Pharmaceuticals,

SVP, Pharmaceutical Dev. Phone: 617-370-8701

LiPP, ralph, PhD To: Noven Pharmaceuticals Inc.,

VP, CSO (October) From: Lipp Life Sciences LLC, Founder Phone: 305-253-5099

meneS, remi a. To: Aegerion Pharmaceuticals Inc.,

Chief Commercial Officer (September)

From: AbbVie Finland, General Mgr. Phone: 855-305-2347

morL, Christopher J. To: Deciphera Pharmaceuticals LLC,

CBO (October) From: miRagen Therapeutics Inc., COO Phone: 781-209-6400

muZiKant, adam, PhD To: Flexion Therapeutics Inc.,

VP, Bus. Dev. (September) From: Synta Pharmaceuticals Corp.,

VP, Bus. Dev. Phone: 781-305-7777

noWerS, Chris To: Kite Pharma Inc.,

Head, Europe (October) From: Bristol-Myers Squibb Co.,

Head, Immuno-Oncology & Hematology, France

Phone: 310-824-9999

o’ConneLL, Carl To: Xtant Medical Holdings Inc.,

Pres. (October) From: Wright Medical Group NV,

Global VP, Extremity Mktg. Phone: 406-388-0480

ParKinSon, Chip To: Myriad Genetics Inc.,

EVP, Reimbursement Strategy (September)

From: Cambia Health Solutions, Pres., OmedaRx & MedSavvy

Phone: 801-584-3600

PLavSiC, mark, PhD To: Lysogene SAS, CTO (October) From: Torque Therapeutics,

Head, Process Dev. & Mfg. Phone: +33 01 5688 52 86

PouK, John To: 10x Genomics Inc.,

Chief Commercial Officer (September)

From: Agilent Technologies, SVP, Global Sales & International Ops.

Phone: 925-401-7300

SteeLe, mark To: OrthoAccel Technologies Inc.,

SVP, Sales, North America (October)

From: MSD, EVP, Sales, Mktg. & Customer Service

Phone: 866-866-4919

❚ marK SteeLeSVP, North America Sales OrthoAccel Technologies

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StePhenS, Kimberly To: Appili Therapeutics Inc.,

CFO (October) From: Immunovaccine Inc., CFO Phone: 902-442-4655

Su, michael, PhD To: Decibel Therapeutics,

CSO (September) From: Agios Pharmaceuticals, SVP, R&D Phone: 617-370-8701

trouPin, Barbara, mD To: Aquinox Pharmceuticals Inc.,

CMO & VP, Clincal Dev. (October) From: Apricus Bioscience Inc., SVP, CMO Phone: 604-629-9223

WinKLer, Jim, PhD To: Forma Therapeutics Holdings LLC,

VP, Discovery & Translational Biology (October)

From: Arvinas Inc., CSO Phone: 203-535-1456

DIrECTOrs

aDamS, thomas h., PhD To: ContraVir Pharmaceuticals Inc.,

Director (September) Phone: 732-902-4000

BiGham, michael F. To: Adamas Pharmaceuticals Inc.,


Brennan, Christine, PhD To: Altimmune Inc.,


hanCe, robert (Chip) To: Vivasure Medical Ltd.,

Director (October) Phone: +35 91 395 440

LurKer, nancy To: X4 Pharmaceuticals Inc.,

Chair (October) Phone: 857-529-8300

PauL, Barbara r., mD To: Natus Medical Inc.,


roWinSKy, eric K., mD To: Navidea Biopharmaceuticals Inc.,

Chairman (September) Phone: 614-793-7500

WenDeLL, amy To: AxoGen Inc.,


aDVIsOrs

Barnett, Gene h., mD To: Diffusion Pharmaceuticals Inc.,

Scientific Advisor (September) Phone: 434-220-0718

CarreL, thierry To: Xeltis AG,

Clinical Advisor (September) Phone: +41 44 269 7979

ChiSoLm, Guy m., PhD To: Diffusion Pharmaceuticals Inc.,

Chairman, Scientific Advisory Board (September)

Phone: 434-220-0718

FaLK, volkmar To: Xeltis AG,


GreenLee, William, PhD To: Rodin Therapeutics Inc.,

Chemistry Advisor (September) Phone: 617-588-2600

heSS, Connie, mD To: Diffusion Pharmaceuticals Inc.,


hiatt, William r., mD To: Diffusion Pharmaceuticals Inc.,


JeFSon, martin, PhD To: Rodin Therapeutics Inc.,

Chairman, Chemistry Advisory Board (September)

Phone: 617-588-2600

JohnSton, Karen C., mD To: Diffusion Pharmaceuticals Inc.,


Leon, martin, mD To: Xeltis AG,


LoWe, John, PhD To: Rodin Therapeutics Inc.,


maCK, michael, mD To: Xeltis AG,


maiSano, Francesco To: Xeltis AG,


mCCaLL, John, PhD To: Rodin Therapeutics Inc.,


moeBiuS, hans, mD, PhD To: Rodin Therapeutics Inc.,


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moSS, neil, PhD To: Rodin Therapeutics Inc.,


Saver, Jeffrey L., mD To: Diffusion Pharmaceuticals Inc.,


SPauLDinG, Christian To: Xeltis AG,


WeLSh-Bohmer, Kathleen a., PhD To: Diffusion Pharmaceuticals Inc.,


WinDeCKer, Stephan To: Xeltis AG,


prOMOTIONs

armStronG, andrea To: C4 Therapeutics Inc. New Title: Chief Administrative Officer

(September) Previous Title: SVP, Human Resources Phone: 202-421-7994

CamPaneLLi, Paul v. To: Endo International PLC New Title: Pres. & CEO (September) Previous Title: Pres., Generics & OTC Phone: +353 1 268 2000

CaSSino, Cara, mD To: ContraFect Corp. New Title: CMO & EVP, R&D (October) Previous Title: CMO & SVP, Dev. Phone: 914-207-2300

ChiLton, Shaun To: Clinigen Group PLC New Title: CEO (November) Previous Title: Deputy CEO Phone: +44 1283 494 340

Chmura, Lori To: Dune Medical Devices Inc. New Title: CEO (October) Previous Title: Pres., US Phone: 484-320-7536

FitZPatriCK, mark J. To: Chiasma Inc. New Title: Pres. & CEO (October) Previous Title: CFO Phone: 866-637-9703

KniCKerBoCKer, aron To: Five Prime Therapeutics Inc. New Title: COO (September) Previous Title: EVP, CBO Phone: 415-365-5600

meSSinGer, michael To: ContraFect Corp. New Title: SVP, Finance (September) Previous Title: VP, Finance Phone: 914-207-2300

Sarena, Francis To: Five Prime Therapeutics Inc. New Title: Chief Strategy Officer

(September) Previous Title: EVP, General Counsel Phone: 415-365-5600

SPieGeL, David a., mD, PhD To: Kleo Pharmaceuticals Inc. New Title: CEO (September) Previous Title: Co-founder Phone: 203-428-4596

rEsIgNaTIONs

CaSey, tom From: Acelity LP Inc., EVP, CFO

(September) Phone: 210-255-6433

WitteKinD, michael, PhD From: ContraFect Corp., CSO & SVP,

Research (October) Phone: 914-207-2300

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Derived from Strategic Transactions, Informa’s premium source for tracking life sciences deal activity, the Dealmaking column is a survey of recent health care transactions listed by relevant industry segment – In Vitro Diagnostics, Medical Devices, Pharmaceuticals, and Research, Analytical Equipment and Supplies – and then categorized by type – Acquisition, Alliance, or Financing.

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�❚ DealmakingCovering deals made October 2016

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z In VItro DIagnostIcs

Mergers & AcquisitionsOxford Immunotec buys Immunetics for $6mm cash plus potential earnouts

FinancingsBiocept nets $9.4mm through public stock offering

MidCap provides Oxford Immunotec with $40mm in debt financing

Diagnostics company Quotient Ltd. raises $120mm through redeemable senior notes

z MeDIcal DeVIcesMergers & AcquisitionsAlliqua BioMedical buys Soluble Systems for $35mm

Fresenius Medical Care buys Xenios

ICU Medical buys Hospira’s infusion therapy business from Pfizer

Arteriocyte Medical, Isto Technologies merge to form Isto Biologics

Katena scoops up Eagle Vision

AlliancesTerumo buys products from Abbott, St. Jude

B. Braun Surgical to sell Dextera’s surgical stapler in Spain

Spinal Elements to market Mighty Oak Medical’s FIREFLY system

Zimmer to distribute Nextremity’s foot and ankle devices

FinancingsAxoGen nets $16.5mm in public offering

ConvaTec completes £1.5bn IPO on LSE

Breast implant manufacturer Establishment Labs raises $15mm in debt funding

Weight loss-focused medical device company Obalon Therapeutics nets $69.8mm in IPO

Organovo nets $23.3mm in follow-on public offering

ReWalk Robotics nets $11.4mm through FOPO

z PharMaceutIcalsMergers & AcquisitionsAntegrin, Cascadia merge to form Indalo

Astellas buys private oncology firm Ganymed €422mm, plus potential earnouts

Celgene buys EngMab for $600mm

Teva divests Allergan’s generics assets (Actavis Generics) and operations in UK and Ireland

AlliancesAZ grants 3SBio exclusive Byetta and Bydureon rights in China

Active Biotech grants NeoTX exclusive rights to Anyara immunotherapy

KemPharm licenses Acura’s Aversion technology to use in its opioid analgesic prodrugs

Specialised Therapeutics to sell Zoptrex in New Zealand and Australia for AEterna

Allergan enters billion-dollar deal for MedImmune’s Crohn’s/colitis candidate

Amgen gets option to cancer, neuro compounds discovered by Nuevolution

AngioSoma, La Jolla Capital form JV to manage Liprostin

EUSA gets global rights to Apeiron’s neuroblastoma antibody Isqette

Aralez gets exclusive US rights to AZ’s Toprol-XL and authorized generic

Arrowhead, Spring Bank combine ARC520/SB9200 in HBV trial collaboration

AZ grants Insmed exclusive global rights to pulmonary disease compound

Cilag gets rights to AZ’s Rhinocort Aqua outside the US

Chong Kun Dang gets rights to Can-Fite’s liver cancer candidate in South Korea

Teva and Celltrion partner in exclusive biosimilars agreement in US and Canada

Cerulean could get up to $1.2bn in NDC collaboration with Novartis

Crescendo Biologics signs first major Humabody collaboration; Takeda gets rights

Debiopharm enters into trial collaboration with Merck KGAA, Pfizer for NSCLC therapy

Takeda gets option to immunomodulatory cancer projects through deal with EnGeneIC

EpimAb and Kymab enter into bispecific antibody cross-licensing deal

Morphotek grants cancer mAb rights to Eurofarma

GSK and Fimbrion team up to develop small molecule for UTIs

Zai Lab signs agreement with GSK for two anti-inflammatory assets

Innovus licenses Seipel’s OTC Urox for OAB, incontinence

Mallinckrodt licenses US rights to three Intellipharmaceutics’ CNS generics

Torii licenses JAK inhibitor from Japan Tobacco

JW Pharmaceutical gets Korean rights to JT’s anemia candidate

Piramal pays $155mm for five Janssen drugs

MonoSol applies PharmFilm to Lupin pediatric drugs

Transgene, Merck KGAA, Pfizer enter trial collaboration for head and neck cancer combo therapy

Merck KGAA and Vaccinex enter trial collaboration for lung cancer immunotherapy

Metuchen takes US, Canadian license to Vivus’ Stendra

Myovant grants Pfizer sublicense option on relugolix and RVT602

Novartis collaborates on rare diseases with drug discovery start-up Perlara

Ocular Therapeutix, Regeneron partner on sustained-release aflibercept

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z In VItro DIagnostIcsMergers & Acquisitions/In Vitro Diagnostics

OXFORD IMMUNOTEC GLOBAL PLCIMMUNETICS INC.Oxford Immunotec Global PLC is paying $6mm in cash to acquire Immunetics Inc. (immunoassays for infectious diseases). Oxford could also shell out up to $6mm in cash upon attaining certain revenue goals and development milestones over the next three years. (Oct.)Immunetics offers rapid, cost-effective ELISA and Western Blot tests that are highly specific and sensitive. Its BacTx is a colorimetric assay kit that can detect aerobic, anaerobic, gram-negative, and gram-positive bacteria in a single test. The QuickELISA kit is designed to detect antibodies to protective antigen of anthrax in human serum. Finally, the C6 B. burg-dorferi (Lyme) ELISA kit delivers faster and more accurate results than any other ELISA and is twice as sensitive than the standard Western Blot in patients with Lyme disease. The transaction comes just four months after Oxford Immunotec paid $22.2mm in cash for Imugen Inc., a clinical laboratory focused on testing for tick-borne diseases.

Financings/In Vitro Diagnostics

BIOCEPT INC.Biocept Inc. netted $9.4mm through the public sale of 9.1mm common shares at $1.10; investors also received five-year warrants for another 9.1mm shares at the same price. The company develops and sells liquid biopsy assays for colorectal, prostate, gastric, and breast cancers. (Oct.)Investment Banks/Advisors: Feltl & Co.; Roth Capital Partners

OXFORD IMMUNOTEC GLOBAL PLCOxford Immunotec Global PLC (diagnostics for infectious diseases and immune disor-ders) received $40mm in debt financing--consisting of a term loan and revolving line of credit--from MidCap Financial. The five-year $30mm term loan accrues interest at a rate of LIBOR+ 7.60% with interest-only payments for the first 24 months (and can be extended to 48 months upon certain condi-tions before the loan begins to amortize.) The five-year $10mm revolving line of credit accrues interest at LIBOR+ 4.45%. Both may be increased by $10mm upon certain condi-tions. (Oct.)

QUOTIENT LTD.Quotient Ltd. (diagnostics for blood grouping and serological disease screening) grossed $120mm through a redeemable senior se-cured notes offering due 2023. The company has already raised a total of $54.2mm this year through two follow-on public offerings to fund

its MosaiQ product. (Oct.)Investment Banks/Advisors: Morgan Stanley & Co.

z MeDIcal DeVIcesMergers & Acquisitions/Medical Devices

ALLIQUA BIOMEDICAL INC.SOLUBLE SySTEMS LLCAlliqua BioMedical Inc. is acquiring pri-vately held fellow wound care company Soluble Systems LLC for total consideration of $35mm. The combined entity will retain the Alliqua name. (Oct.)Alliqua will issue approximately 17.6mm of its common shares (valued at $0.89 apiece); assume $12.4mm in senior debt; pay $5.4mm in cash to retire subordinated debt plus $500k in other consideration; and issue warrants for 4mm shares of the combined company exercisable at $1.07. (Alliqua’s stock was averaging $0.79 prior to the acquisition.) Soluble was formed in 1999 and markets its human living skin al-lograft TheraSkin. TheraSkin is made from living cells, fibroblasts, keratinocytes, and a fully developed extracellular matrix, and is indicated for a wide range of tissue and wound care needs including diabetic foot ulcers, pressure and venous leg ulcers, burns, radiation injury, and necrotizing fasciitis, and can also be used over exposed muscle, tendon, bone, and joint capsule. The product is highly complementary to Al-liqua’s offerings which include Mist Therapy (low-frequency ultrasound delivered to a wound bed through saline mist), Biovance (amniotic membrane allograft (placental de-rived) sterile wound covering), and Interfyl (connective tissue matrix, also derived from placental tissue, in particulate and flowable formations correction of soft tissue defects). Investment Banks/Advisors: Cowen & Co. LLC (Alliqua BioMedical Inc.); Canaccord Genuity Inc. (Soluble Systems LLC)

FRESENIUS SE & CO. KGAAFresenius Medical Care AG & Co. KGAAXENIOS AGFresenius Medical Care AG & Co. KGAA has acquired Xenios AG (devices for lung and cardiac failure) from German VC firm zfhn Zukunftsfonds Heilbronn for an undisclosed sum. (Oct.)Zfhn took over artificial lung manufacturer Novalung in 2008 and two years later the VC got majority ownership of blood pump systems developer Medos Medizintechnik. In 2013, Novalung and Medos merged to create Xenios, which offers lung and heart therapies on a single platform. Within the platform are three brands: novalung prod-ucts for CO2 removal and oxygenation in acute respiratory failure and COPD, i-cor for synchronized cardiac assist, and the medos

Sarepta licenses EU rights to Summit’s ezutromid for up to $952mm

TaiGen, yiChang HEC create JV in the Greater China region

FinancingsAdvanced Accelerator Applications nets $141mm in ADS offering

AEterna nets $7mm through RDO

Ascendis nets $112.8mm via public sale of ADSs

AzurRx BioPharma nets $4.8mm in IPO

Cerulean Pharma enters stock purchase agreement with Aspire for up to $20mm

Cidara nets $27mm via FOPO

Genome editing company CRISPR Therapeutics nets $52mm in IPO

CRISPR raises $35mm through sale of 2.5mm shares to partner Bayer

Dynavax enters into $100mm committed financing agreement with Deerfield; funds contingent upon drug approval

GTx brings in $14mm through registered direct offering

Horizon raises $300mm in senior notes

Idera follow-on nets $47mm

Immunomedics nets $28.8mm through public stock sale

Myovant Sciences nets $202mm in IPO on NYSE

Nektar Therapeutics nets $165mm in follow-on public offering

Probi grosses SEK601.6mm in rights offering

Puma Biotechnology nets $162mm through public stock sale

Ra Pharmaceuticals nets $85.2mm in IPO

Ritter nets $4.65mm via FOPO

Scynexis gets $15mm term loan from Solar Capital

Sunesis nets $26.2mm through public sale of common and preferred shares

Theravance nets $288mm through concurrent public debt and share offerings

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portfolio for cardiac surgery. With the acqui-sition, renal-focused Fresenius Medical Care now adds cardiac and respiratory products to its extracorporeal organ support portfo-lio. Investment Banks/Advisors: Jefferies & Co. Inc. (Xenios AG)

ICU MEDICAL INC.PFIZER INC.Hospira Inc.Hospira Infusion SystemsSeeking to become a leading global pure play infusion therapy firm, ICU Medical Inc. is paying $1bn--$400mm in its stock and $600mm in cash--to acquire Pfizer Inc.’s Hospira Infusion Systems business. (Oct.)Post-transaction, Pfizer will hold a 16.6% stake in ICU Medical. As long as Pfizer owns at least 10% equity it will hold a right to nominate one director to ICU’s board. ICU gains a portfolio of IV sets, the LifeShield line of IV safety devices, infusion pumps, and solutions. The acquisition builds on an existing 20+-year relationship between ICU and Hospira in which Hospira was integrat-ing ICU’s needle-free technology into their infusion offerings. With the Hospira busi-ness under its belt, ICU estimates combined revenues of $1.45bn based on trailing twelve month results as of June 2016. Pfizer bought Hospira Inc. last year, shelling out $15.4bn in cash and $1.75bn in debt. For about five years Pfizer had been contemplating split-ting up into two entities--one focused on developing and selling new drug brands and the other on older brands, generics, and biosimilars. Just one week ago the Big Pharma announced it was scrapping those plans. Investment Banks/Advisors: Gold-man Sachs & Co.; Guggenheim Partners LLC (Pfizer Inc.); Barclays Bank PLC; Wells Fargo Securities LLC (ICU Medical Inc.)

ISTO TECHNOLOGIES INC.ARTERIOCyTE MEDICAL SySTEMS INC.Private musculoskeletal device firms Isto Technologies Inc. and Arteriocyte Medical Systems Inc. are merging and will operated under the Isto Biologics name. (Oct.)Isto Biologics will focus on the spine, orthopedics, and functional medicine mar-kets. The company will offer Arteriocyte’s Magellan autologous platelet separator, MagellanPRP platelet rich plasma, and MAROMatch/MAROFuse demineralized bone matrix. Isto Technologies’s products include the InQu bone graft extender and substitute, Influx natural bone graft mate-rial, and CellPoint bone marrow aspirate system. Isto Technologies’ CEO will take the helm at Isto Biologics.

KATENA PRODUCTS INC.EAGLE VISION INC.Katena Products Inc. is acquiring fellow private ophthalmic device developer Eagle Vision Inc. for an undisclosed sum. (Oct.)Eagle Vision is a market leader in punctal plugs for treating dry eye syndrome. Other

dry eye offerings are synthetic dissolvable plugs, flow controllers, and tear test strips. Surgical products include the Graether 2000 pupil expander and stents. Katena kicked off 2016 by buying another ophthal-mic device maker, Sensor Medical Technol-ogy, giving Katena a portfolio of single-use and reusable lenses used by ophthalmolo-gists and optometrists during procedures.

Alliances/Medical Devices

ABBOTT LABORATORIES INC.ST. JUDE MEDICAL INC.TERUMO CORP.Terumo Corp. is paying $1.12bn in cash to acquire certain products from Abbott Labo-ratories Inc. and St. Jude Medical Inc. (Oct.)Abbott agreed to buy St. Jude back in April for $25bn and the product divestiture to Terumo is contingent upon the closing of that transaction as well as antitrust regula-tory approvals. All three parties are bound by the terms of an exclusivity agreement. Included in the divestiture are St. Jude’s Angio-Seal and Femoseal vascular closure products and Abbott’s Vado steerable sheath. (Abbott is holding onto its vascular closure products, including Perclose Pro-Glide, StarClose SE, and Prostar.)

B. BRAUN MELSUNGEN AGAesculap AGB. Braun Surgical SADEXTERA SURGICAL INC.Dextera Surgical Inc. (formerly Cardica Inc.) has chosen B. Braun Surgical SA as the exclusive marketer and distributor of the MicroCutter 5/80 surgical stapler in Spain. (Oct.)B. Braun SA will sell the device through its laparoscopic unit to surgeons in the minimally invasive surgery market. The MicroCutter 5/80 is the only 5mm stapler on the market with 80 degrees of articulation. It is approved for use during transection and resection in multiple open or minimally invasive urologic, thoracic, and pediatric surgeries; transection, resection, or cre-ation of anastomoses in the small and large intestine; and transection of the appendix. The stapler is complementary to B. Braun’s laparoscopic offerings including the Caiman advanced bipolar seal and cut instruments, and the EinsteinVision 3D camera system.

MIGHTy OAK MEDICALSPINAL ELEMENTS INC.Mighty Oak Medical licensed Spinal Ele-ments Inc. rights to market its FDA-approved FIREFLY guidance system for use in spine surgeries. (Oct.)The FIREFLY system is comprised of bone models and guides--created using 3D printing technologies--that are precisely matched to the patient’s anatomy through pre-surgical planning and computer-designed guidance tools. It enables opti-

mal implant placement by incorporating surgeon-defined preferences for medial line angles and entry points into the design of the patient-specific pedicle screw guides.

NEXTREMITy SOLUTIONS INC.ZIMMER BIOMET HOLDINGS INC.Zimmer Biomet Holdings Inc. received ex-clusive global rights to distribute Nextrem-ity Solutions Inc.’s foot and ankle deformity correction products. (Oct.)Included in the agreement are the Nextra hammertoe correction system (the only available two-piece hammertoe implant); MSP metatarsal shortening system con-taining an osteotomy guide and implant; Re+Line bunion correction system; and Arcus staple system. Zimmer will add these products to its portfolio of ankle implants and tools for ankle arthroplasty including the Trabecular Metal total ankle.

Financings/Medical Devices

AXOGEN INC.Regenerative medicine company AxoGen Inc. (peripheral nerve allografts) netted $16.5mm in the public offering of 2.3mm common shares at $7.50. The company will use the proceeds to expand its product portfolio, which includes the Avance human nerve allograft and the Axo-Guard line of porcine submucosa extracellular matrixes to connect, repair, and protect injured peripheral nerves and reinforce reconstruction of new nerves. (Oct.)Investment Banks/Advisors: Dougherty & Co. LLC; JMP Securities LLC

CONVATEC INC.ConvaTec Inc. (devices, accessories, and supplies for the hospital market to treat and manage chronic conditions) grossed approximately £1.47bn ($1.8bn) in its initial public offering on the London Stock Exchange. The company issued new shares at a price of £2.25 (the low end of its an-ticipated range) to certain institutional and other investors in the UK and outside the US. Following the close of the IPO, Nordic Capital and Avista Capital Partners will respectively hold 45.1% and 19.5% ownership stakes. ConvaTec will use most of the proceeds to repay existing debt. (Oct.)Investment Banks/Advisors: Bank of America Merrill Lynch; Credit Suisse Group; Deutsche Bank AG; Evercore Partners; Gold-man Sachs & Co.; JP Morgan & Co.; Morgan Stanley & Co.; Peel Hunt LLP; RBC Capital Markets; UBS Investment Bank

ESTABLISHMENT LABS SAEstablishment Labs SA (breast implants) raised $15mm in debt from backers Perceptive Advisors, JW Asset Management, and Relativ-ity Healthcare fund. The company will use the proceeds to expand its Motiva breast implants internationally, finalize a new manufacturing facility and start US FDA trials. (Oct.)

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OBALON THERAPEUTICS INC.Obalon Therapeutics Inc. (medical devices for weight loss) netted $69.8mm in its IPO of 5mm common shares at $15. (Oct.)Investment Banks/Advisors: BTIG LLC; Canaccord Genuity Inc.; Stifel Nicolaus & Co. Inc.; UBS Investment Bank

ORGANOVO HOLDINGS INC.Organovo Holdings Inc. (3D bio-printing technology) netted $23.3mm in a follow-on public offering 9mm shares at $2.75. The company will use the proceeds for R&D, development, and commercialization of its products. (Oct.)Investment Banks/Advisors: BTIG LLC; Ever-core Partners; Jefferies & Co. Inc.; Raymond James & Associates Inc.

REWALK ROBOTICS LTD.ReWalk Robotics Ltd. (wearable robotic exoskeletons for spinal cord injury patients) netted $11.4mm through the public offering of 3.25mm units at $3.75. Each unit consists of one ordinary share and 0.75 of a five-year warrant to purchase one ordinary share at an exercise price of $4.75. (Oct.)Investment Banks/Advisors: Oppenheimer & Co. Inc.

z PharMaceutIcalsMergers & Acquisitions/Pharmaceuticals

ANTEGRIN THERAPEUTICS INC.CASCADIA THERAPEUTICSAntegrin Therapeutics Inc. and Cascadia Therapeutics are merging to create Indalo Therapeutics to focus on developing thera-pies for fibrotic diseases. (Oct.)To the new firm, Antegrin contributes a port-folio of small-molecule integrin antagonists, while Cascadia adds expertise in drug develop-ment expertise and seasoned executives. In-dalo’s candidates have demonstrated efficacy in preclinical studies in fibrosis across multiple organ systems. It anticipates commencing IND-enabling studies next year with clinical trials expected in early 2019. Cascadia’s co-founders Williamson Bradford, MD, PhD, and Scott Sei-wert, PhD, are former execs at InterMune (now part of Roche) where they helped develop the idiopathic pulmonary fibrosis drug Esbriet (pir-fenidone). Dr. Bradford will become Indalo’s CMO and handle clinical development and regulatory activities. Dr. Seiwert will serve as CSO, responsible for research and preclinical development. Antegrin’s current CEO George Capps retains his position at the merged entity.

ASTELLAS PHARMA INC.GANyMED PHARMACEUTICALS AGAstellas Pharma Inc. is paying €422mm ($460mm) in cash to acquire cancer-focused Ganymed Pharmaceuticals AG. Astellas will also shell out up to €860mm ($938mm)

based on the progress in development of Ganymed’s lead program IMAB362, which is currently in Phase IIb for gastroesophageal cancer. (Oct.)Post-transaction, Ganymed becomes a whol-ly owned Astellas subsidiary. IMAB362 is an antibody therapy targeting the Claudin 18 protein, which is only present in cancerous stomach cells. In addition to gastroesopha-geal cancer, the candidate is also in clinical trials for pancreatic cancer and in preclinical studies for solid tumors including ovarian and lung cancers. IMAB362 received orphan drug status in the US and Europe for gastric and pancreatic cancer. Also in the Ganymed pipeline is IMAB027, which selectively binds to the cell surface protein Claudin 6 (CLDN6) that’s present in a wide range of cancers, including testicular, ovarian, uterine, and lung. The unique mechanism of IMAB027 allows it to selectively and efficiently kill tumor cells without harming healthy non-cancerous cells. Phase II studies are slated for the end of 2016. Ganymed’s candidates will strengthen Astellas’ presence in oncol-ogy, a market where the firm sells Xtandi for prostate cancer. The drug was co-developed with Medivation (now part of Pfizer) under a 2009 agreement and is currently in Phase III trials for breast cancer. Ganymed is backed by investors including ATS Beteiligungsver-waltung, MIG Fonds, FCP Gany, and Future Capital. Investment Banks/Advisors: JP Mor-gan & Co. (Ganymed Pharmaceuticals AG)

ENGMAB AGCELGENE CORP.Celgene Corp. acquired privately held im-munotherapies start-up EngMab AB for $600mm. The company will operate as a Celgene subsidiary. (Oct.)EngMab, formed in 2013, focuses on T-cell bispecific antibodies, which simultaneously bind to a target on a cancer cell and to the T-cell receptor complex, causing tumor cell death. The company has two projects in early development, one of which targets the B-cell maturation antigen (BCMA), which is highly expressed on both solid and blood cancers. An IND for the candidate is expected during 2017. Celgene says that EngMab’s work is highly complementary to its own chimeric antigen receptor work, specifically its recent tie-up with bluebird bio where Celgene has rights to a BCMA candidate for myeloma, and options for further projects in the area.

INTAS PHARMACEUTICALS LTD.Accord Healthcare Ltd.ALLERGAN PLCActavis Group TEVA PHARMACEUTICAL INDUSTRIES LTD.Teva Pharmaceutical Industries Ltd. sold off the UK and Ireland assets and operations of Allergan’s Actavis Generics business (acquired last year) to Accord Healthcare Ltd. (Oct.)

The £603mm ($772mm) sale price entitles Accord to a portfolio of generic medicines along with a manufacturing plant in Barn-staple, England. Teva will retain any Actavis non-overlapping generics and specialty medicines and OTC products. The divest-ment fulfills a required anticompetitive condition by the European Commission as a result of Teva’s Actavis acquisition earlier in the year and makes Accord the partner of choice in these countries. Investment Banks/Advisors: Greenhill & Co. Inc. (Teva Pharmaceutical Industries Ltd.)

Alliances/Pharmaceuticals

3SBIO INC.ASTRAZENECA PLCAstraZeneca PLC licensed 3SBio Inc. exclu-sive Chinese marketing rights to its diabetes products Byetta (exenatide) and Bydureon (once-weekly exenatide) (single dose tray, dual chamber pen, and auto-injector). (Oct.)3SBio pays $50mm up front, $25mm once AZ receives an import drug license for the Bydureon single dose tray, and another $25mm when AZ gets the import drug license for the Bydureon dual chamber. The active ingredient in both products, exenatide, is a GLP-1agonist that helps the body produce insulin to stabilize blood sugar in patients with Type II diabetes. Byetta--approved by the China FDA in 2009 and with 2015 Chi-nese revenues of $14.6mm--is injected twice daily, while Bydureon--awaiting Chinese approval--is an extended release version of the drug that only requires dosing once per week. AZ originally gained rights to the products in late 2013 when BMS divested its global diabetes business to AZ for $2.7bn up-front and up to $1.6bn in milestones in a deal that currently sits as the second largest licensing deal by deal value in the last five years. AZ is out-licensing the product rights in China so that it can further focus on its respiratory business in that country. 3SBio takes on Byetta and Bydureon as a means of continuing to diversify the company’s portfolio; it sells therapies in the oncology, nephrology, and dermatology spaces, and counts two other diabetes treatments in its product list: Qiming Keli for Type II diabetic neuropathy, and Yi Li Xi for Type II diabetes.

ACTIVE BIOTECH ABNEOTX THERAPEUTICS LTD.Israeli biotech NeoTX Therapeutics Ltd. licensed exclusive global rights to develop and sell Active Biotech AB’s cancer im-munotherapy Anyara (naptomumab estaf-enatox). (Oct.)The total deal value could hit $71mm, with $250k in up-front cash and the remainder in potential development, regulatory, and sales milestones, plus double-digit royalties. Anyara, a tumor targeting su-perantigen, has shown positive results in Phase I studies both as a monotherapy (for

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lung, renal, and pancreatic cancers) and in combination with docetaxel (advanced can-cer); Phase II/III trials in combination with interferon alpha in renal cancer met safety but not efficacy endpoints. NeoTX plans to study Anyara in combination with check-point inhibitors. The company has other undisclosed immuno-oncology projects in its pipeline. Prior to the in-licensing, it an-nounced an $8.8mm Series A round from investors including Starr Ventures.

ACURA PHARMACEUTICALS INC. KEMPHARM INC.KemPharm Inc. licensed Acura Pharma-ceuticals Inc.’s Aversion abuse-deterrent technology, which it will apply to three of its existing immediate-release (IR) prodrug opioid candidates, including KP201/IR, with the option to use the platform on two addi-tional KemPharm prodrug candidates. (Oct.)Acura’s Aversion technology for orally administered opioid drugs combines gelling ingredients and nasal irritants to discourage abuse by injection or snorting. Acura’s own marketed oxycodone pain drug Oxaydo (licensed to Egalet) is formulated with Aversion. In exchange for exclusive rights to use Aversion in the development and commercialization of three of its own IR opioid compounds, KemPharm will provide $3.5mm up front and royalties in the low single-digit range. If KemPharm exercises its option to use the Aversion technology with more than the initial three candidates, Acura will be eligible for $1mm per program. KemPharm will have sole rights to any re-sulting intellectual property related to new product development. The deal includes KP201/IR (benzhydrocodone HCl, a prodrug of hydrodocodone), an acetaminophen-free, IR version of KemPharm’s acute pain candidate KP201, which is now known as Apadaz and its NDA is under review by the FDA. Made using KemPharm’s LAT (ligand-activated therapy) prodrug platform, KP201/IR has the same abuse-deterrent properties as Apadaz. The LAT technology enables the creation of NME prodrugs by chemically attaching one or more ligands to an FDA-approved parent drug. In addition to KP201/IR, for which an IND is expected before year end, other opioid analgesic prodrugs in KemPharm’s pipeline include KP511/ER (prodrug of hydromorphone) for severe pain and long-term use; KP606/IR (prodrug of oxycodone) for moderate to severe pain; and KP746 (a prodrug of oxymorphone).

AETERNA ZENTARIS INC.SPECIALISED THERAPEUTICS

AUSTRALIA PTy. LTD.AEterna Zentaris Inc. chose Specialised Therapeutics Asia (an affiliate of Special-ised Therapeutics Australia Pty. Ltd.) to exclusively develop and sell the endometrial cancer candidate Zoptrex (zoptarelin doxo-rubicin) in New Zealand and Australia. (Oct.)AEterna gets undisclosed money up front,

regulatory and commercialization mile-stones, and double-digit royalties. Spe-cialised Therapeutics is responsible for all development, registration, reimbursement, and marketing in its territories, and AEterna will manufacture and supply the product. Zoptrex is in Phase III trials, which are expected to be completed by the end of the year, followed by an NDA submission in the US during the first half of 2017. AEterna’s other partners for the therapy include Sinopharm A-Think (China, Hong Kong, and Macau), Cyntec (Taiwan and certain South-east Asia countries), and most recently Rafa (Israel and Palestian territories). AEterna’s cancer portfolio includes Abraxane (under license from Celgene; breast, non-small cell lung, and pancreatic cancers); Gliolan (through a license from photonamic; imag-ing agent for brain tumor visualization); and Oncotype Dx (Genomic Health; breast and prostate cancer diagnostic).

ALLERGAN PLCASTRAZENECA PLCMedImmune LLCAZ’s MedImmune LLC granted Allergan PLC exclusive global rights to develop and sell its MEDI2070, an interleukin-23 monoclonal antibody in Phase IIb for Crohn’s disease and entering Phase II ulcerative colitis and related disorders. (Oct.)Terms of the deal call for Allergan to pay $250mm up front, up to $1.27bn in milestones (including $435mm upon market launch and $725mm in sales milestones) over a 15-year period, plus tiered up to low-double digit tiered royalties (Strategic Transactions as-sumes a cap of 29%). AZ and MedImmune originally gained rights to the compound (then called AMG139) in 2012 through a deal with Amgen. That deal called for collaborative de-velopment and commercialization activities, with AZ taking the lead for AMG139 and two other compounds, and Amgen handling two of its own. As that alliance involved cost and profit sharing, the current deal with Allergan results in Amgen seeing some of the money Allergan pays to AZ. Of the up-front payment and milestones, Amgen gets one third (or $83mm of the up-front and $419mm of the milestones), plus a single-digit percentage inventor royalty. MEDI2070 boosts Allergan’s gastroenterology offerings; the company al-ready markets its own treatments for irritable bowel syndrome, chronic idiopathic constipa-tion, and ulcerative colitis.

AMGEN INC.NUEVOLUTION ASNuevolution AB licensed Amgen Inc. an exclusive option to develop and commercial-ize small-molecule cancer and neuroscience therapies. (Oct.)Nuevolution will use its Chemetics platform to discover targets of interest to Amgen. Chemetics enables DNA-encoded synthesis of billions of chemically diverse drug-like small molecules and can rapidly and ef-

ficiently screen and optimize those com-pounds. Should Amgen opt to license the compounds it would pay Nuevolution up to $410mm per target in the form of an option exercise fee and milestones. Nuevolution is also eligible for sales royalties. Nuevolution will handle early-stage research, while Am-gen will collaborate on late-stage research and be solely responsible for preclinical studies, clinical trials, and commercializa-tion. The parties ultimately seek to use their IP and expertise to develop compounds for targets that are difficult to make using traditional methods.

ANGIOSOMA INC.ANGIOSOMA-LA JOLLA CAPITAL JVAngioSoma Inc. and La Jolla Capital Partners are creating a joint venture to handle activi-ties for AngioSoma’s Liprostin (alprostadil) a liposomal encapsulated prostaglandin e1 for peripheral artery disease. (Oct.)The JV will fund and manage FDA Phase III trials, obtain regulatory approval, and exclusively license the drug to a partner for global commercialization. AngioSoma chose La Jolla Capital because of the firm’s experience with FDA regulatory activities and its success in product licensing. (La Jolla Capital was formed in 2010 to help healthcare firms with capital formation, marketing and sales challenges, and part-nerships.) The companies have initially budgeted $4mm for the JV. La Jolla will seek to secure funding but will fund the JV for the first six months and get reimbursed up to $400k. Should La Jolla fail to get funding at the end of six months, AngioSoma can opt to end the agreement. If La Jolla secures the $4mm and successfully finds a licensee for Liprostin, it will receive 25% of any surplus from the budgeted amount for securing the FDA approval; 25% of the resulting royalty payments or fees; and five-year warrants to purchase 2mm AngioSoma common shares at an exercise price of $0.25.

APEIRON BIOLOGICS AGEUSA PHARMAApeiron Biologics AG granted EUSA Phar-ma exclusive global rights to commercialize Isqette (dinutuximab), an immunotherapy indicated for high-risk neuroblastoma. (Oct.)EUSA pays money up front (with some funds held until EU approval), regulatory mile-stones for achievements in territories aside from the EU, and royalties. Isqette (which Apeiron had been developing as APN311; licensed from Children’s Cancer Research Institute and theSoc. of Paed. Oncology Euro. Neuroblastoma Res. Ntwk. (SIOPEN) in 2011) has orphan drug designation in the US and EU, and is awaiting approval by the EMA. Filings in the US and Japan are expected next year. Neuroblastoma is a rare childhood cancer that forms in nerve tissue of the adrenal gland, neck, chest, or spinal cord. If launched in the US, EUSA’s Isqette will face competition from United Thera-

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ARALEZ PHARMACEUTICALS INC.ASTRAZENECA PLCAralez Pharmaceuticals Inc. licensed exclusive US rights to AstraZeneca PLC’s cardio drug Toprol-XL (metoprolol) and its authorized generic. (Oct.)Toprol-XL is a beta blocker marketed for hypertension, angina, and stable, symptom-atic heart failure. US sales for the branded and generic versions hit $89mm in 2015, and sales through June 2016 amounted to $53mm. Aralez pays $175mm up front, up to $48mm in milestones and sales-related payments, and mid-teen royalties (Strate-gic Transactions assumes 15-17%). AZ is in charge of manufacturing for at least 10 years, and agreed to continue distributing the product for Aralez for up to nine months during a transition period. The deal is the second in as many months for Aralez, as the company continues to strengthen its cardio-vascular product offerings. In September it paid $25mm up front and committed to up to $80mm in sales milestones for exclusive US and Canadian rights to Merck’s thrombosis drug Zontivity (vorapaxar).

ARROWHEAD PHARMACEUTICALS INC.SPRING BANK PHARMACEUTICALS INC.Arrowhead Pharmaceuticals Inc. and Spring Bank Pharmaceuticals Inc. will col-

laborate to study Arrowhead’s ARC520 along with Spring Bank’s SB9200 as a potential chronic hepatitis B (HBV) treatment. (Oct.)Injectable ARC520 is a gene expression in-hibitor that uses Arrowhead’s RNA interfer-ence (RNAi) chemistries and delivery meth-ods. Arrowhead licensed the compound from Alnylam under a 2012 partnership (in which Alnylam also has rights to Arrow-head’s RNAi technology IP). ARC520 is now under evaluation for safety and efficacy in the MONARCH Phase IIb study, which began in January 2016, and involves the adminis-tration of ARC520 alone and in combination with other approved nucleoside/nucleotide polymerase inhibitors (such as entecavir, tenofovir, or pegylated interferon alpha 2a) to 96 patients with chronic HBV infection. The study is expected to be completed in March 2019. Spring Bank’s orally-available selective immunomodulatory compound SB9200 is undergoing a Phase IIa trial called ACHIEVE (initiated in June 2016) in which it’s being studied first as an HBV monotherapy to evaluate dosing for 12 weeks, followed by an equivalent duration of dosing with Gilead Sciences’ Viread (tenofovir), and then a combination study with Viread. (Spring Bank has a separate November 2015 trial collaboration with Gilead.) Under the current deal, the partners will first conduct pre-clinical studies with the combined ARC520/SB9200 and then study the agents as a part of Arrowhead’s ongoing MONARCH Phase IIb

study, in which patients will receive a dosing regimen that includes ARC520, SB9200, and an oral antiviral.

ASTRAZENECA PLCINSMED INC.AstraZeneca PLC granted Insmed Inc. ex-clusive global rights to the dipeptidyl pepti-dase 1 inhibitor AZD7986, which Insmed will rename INS1007 and develop for non-cystic fibrosis bronchiectasis. (Oct.)Insmed pays $30mm up front, $85mm in development and regulatory milestones, $35mm in milestones once sales hit $1bn, and high-single digit to mid-teen royalties (Strategic Transactions assumes 8-16%). AZ retains an option to obtain rights to sell the candidate for chronic obstructive pulmonary disease or asthma. (AZ developed it through Phase I trials for COPD prior to the licensing.) Non-CF bronchiectasis is a neutrophil-driven pulmonary disease that causes bronchi to become permanently dilated from chronic infection and inflammation. The disorder increases chances of a patient developing nontuberculosis mycobacterial (NTM) lung disease, which can cause irreversible lung damage and become fatal. Insmed has Ari-kayce (liposomal amikacin for inhalation) in a Phase III study for NTM lung disease and completed Phase II for infections in non-CF bronchiectasis. The company looks forward to developing AZ’s candidate alongside Arikayce, and eventually marketing both as

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complementary products for patients with NTM and bronchiectasis.

ASTRAZENECA PLCJOHNSON & JOHNSONCilag GMBH InternationalAstraZeneca PLC licensed Johnson & Johnson’s Cilag GMBH International ex-US rights to its Rhinocort Aqua (budesonide) nasal spray. (Oct.)Cilag will pay AZ $330mm up front for the rights. Rhinocort Aqua is a nasal steroid for treating allergic and non-allergic rhinitis as well as nasal polyps. AZ divested the rights to focus on its core respiratory assets, including asthma and COPD products such as Symbicort and Pulmicort.

CAN-FITE BIOPHARMA LTD.CHONG KUN DANG PHARMACEUTICAL

CORP.Can-Fite BioPharma Ltd. granted Chong Kun Dang Pharmaceutical Corp. (CKD) exclusive rights to sell its liver cancer can-didate CF102 in South Korea. (Oct.)Can-Fite could get up to $3mm in up-front and milestone payments, plus royalties in the low-twenties (Strategic Transactions assumes 20-23%). Can-Fite will supply CKD with the finished product, and gives the company right of first refusal to sell it for additional indications developed by Can-Fite. CF102 is an adenosine A3 recep-tor agonist in Phase II as a second-line treatment for advanced hepatocellular carcinoma. The company also plans to run a Phase II study in non-alcoholic fatty liver disease, a precursor to NASH (non-alcoholic steatohepatitis).

CELLTRION INC.TEVA PHARMACEUTICAL INDUSTRIES LTD.Celltrion Inc. licensed Teva Pharmaceutical Industries Ltd. exclusive rights to commer-cialize in the US and Canadian its Rituxan (CTP10) and Herceptin (CTP6) biosimilars to in exchange for a $160mm up-front payment ($60mm is refundable upon certain circum-stances). The two companies will share in the profit from the commercialization of the biosimilars. (Oct.)CTP10 is the proposed Rituxan (rituximab) biosimilar currently in late Phase III devel-opment, and is used to treat non-hodgkin’s lymphoma, chronic lymphocytic leukemia, rheumatoid arthritis, Wegner’s granuloma-tosis, and microscopic polyangiitis. CTP6 is the Herceptin (trastuzumab) biosimilar also in late Phase III, used for the treatment of HER2-overexpressing breast cancer and HER2-overexpressing metastatic gastric or gastroesophageal junction adenocarci-noma. Combined annual net sales for the branded products are $6.5bn in the US and Canada alone. Teva will be responsible for all commercial activities in the US and Canada, while Celltrion is responsible for completing clinical development and regulatory activities. Celltrion has already

demonstrated success in the area with its Remsima biosimilar Inflectra (infliximab).

CERULEAN PHARMA INC.NOVARTIS AGNovartis Institutes for BioMedical

Research Inc.Cerulean Pharma Inc. and Novartis Insti-tutes for BioMedical Research Inc. will collaborate on the development of up to five nanoparticle-drug conjugate (NDC) candi-dates for cancer to which Novartis will have exclusive worldwide development, manufac-turing, and commercialization rights. (Oct.)Cerulean’s Dynamic Tumor Targeting platform conjugates active pharmaceutical ingredients (APIs) to polymers, positioning them within nanoparticles to selectively attack tumor cells while bypassing the body’s healthy cells, thus reducing toxicity and enabling therapeutic combinations. Under the deal’s initial two-year term (which Novartis may extend by up to two additional one-year periods on a program-by-program basis), Cerulean will conduct preclinical research, using its Dynamic Tu-mor Targeting technology to covalently link a polymer to APIs Novartis-selects for up to five target compounds. Novartis will take over further development and commercialization. Novartis provides $5mm up front, funding for up to five full-time Cerulean employees, and for each NDC program: $7mm in commercial license fees (prior to human clinical trials), $41.5mm in possible preclinical, clinical, and regulatory milestones, up to $185mm in sales milestones, and single-digit to low double-digit tiered royalties (Strategic Transactions estimates 1-30%) on net sales. In all, Ceru-lean could receive up to $233.5mm in total milestones per program, or $1.17bn for all five programs. NIBR’s cancer research programs include numerous technology platforms and many partnerships with various research and academic institutions, other Big Pharmas, and biotechs. Novartis concurrently announced a collaboration with rare disease start-up Perlara, leveraging the company’s CRISPR-engineered animals drug discovery platform.

CRESCENDO BIOLOGICS LTD.TAKEDA PHARMACEUTICAL CO. LTD.Takeda OncologyCrescendo Biologics Ltd. signed its first major partnership, penning a deal with Takeda Pharmaceutical Co. Ltd. (through its Takeda Oncology unit) to discover new immuno-oncology therapies. (Oct.)Takeda pays $36mm in up-front fees, an eq-uity investment, R&D funding, and preclini-cal milestones, plus up to $754mm in ad-ditional development, regulatory, and sales milestones, as well as royalties. Crescendo will use its transgenics platform to discover and configure Humabody candidates (drug conjugates and immuno-oncology modula-tors) against multiple targets that Takeda will select. Takeda gets global development and commercialization rights to resulting projects. Humabodies are based on fully hu-

man VH domain building blocks, are small in size, and can rapidly accumulate in tumors while at the same time quickly clearing from circulation to avoid systemic toxicity. Takeda has not disclosed specific cancer targets it is eyeing. While Takeda has been deal-active in recent months (through an alliance around a gastroparesis compound with Altos (Takeda also has an option to buy the biotech), and a $400mm+ Crohn’s dis-ease tie-up with TiGenix), the company has also been undergoing R&D reorganization shifts. It has cut back on research activities outside of core areas, turned over a lot of its R&D work in North America and Europe to the CRO PRA Health, and last month, axed a development deal with MacroGenics in which Takeda could have exercised an option to an autoimmune disease project.

DEBIOPHARM GROUPDebiopharm International SAMERCK KGAAPFIZER INC.Debiopharm International SA entered into a trial collaboration agreement with Merck KGAA and Pfizer Inc. to evaluate the com-bination of Debiopharm’s Debio1143 with its partners’ avelumab for non-small cell lung cancer. (Oct.)Debiopharm has Debio1143, an oral inhibitor of IAPs (inhibitor of apoptosis proteins), in Phase II trials for head and neck and ovarian cancers, and Phase I for melanoma, acute myelogenous leukemia, and lymphoma. Under a 2014 co-development and co-commercialization deal, Merck and Pfizer are developing avelumab, an anti-PD-L1 IgG1 monoclonal antibody, in Phase III studies for tumors including non-small cell lung, renal, esophageal, stomach, ovarian, and bladder cancers, as well as earlier tri-als for carcinoma, melanoma, Hodgkin’s lymphoma, and breast, colorectal, and prostate cancers. Debiopharm will handle the initial Phase I/Ib trial of the combination therapy for NSCLC. This is the second deal that Merck and Pfizer have signed involving avelumab this month. They also penned a trial collaboration for Transgene to study its immunotherapy TG4001 together with the mAb for HPV-positive head and neck squamous cell carcinoma.

ENGENEIC LTD.TAKEDA PHARMACEUTICAL CO. LTD.Takeda OncologyEnGeneIC Ltd. will use its EDV nanocell plat-form to discover cancer cyto-immunotherapies for Takeda Pharmaceutical Co. Ltd., which holds an exclusive licensing option. (Oct.)Takeda pays an up-front access fee and research funding, while EnGeneIC conducts research and develops the programs. The EDV platform uses antibody-targeted bacteria-derived nanocells to release high concentrations of chemotherapeutics, tar-geted drugs, and RNAi molecules directly into tumor cells. It allows for targeted cell

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death while also stimulating the body’s natural anticancer immune response. The deal is the second immuno-oncology tie-up for Takeda in as many days. It also an-nounced a deal for Crescendo Biologics’ transgenics-based Humabody candidates; under that collaboration, Takeda could pay up to $790mm. Financials for the EnGeneIC alliance were not disclosed.

EPIMAB BIOTHERAPEUTICSKyMAB LTD.EpimAb Biotherapeutics Inc. and Kymab Ltd. announced an immuno-oncology de-velopment and cross-licensing agreement for bispecific therapeutic antibodies against multiple cancer targets. (Oct.)The partners will use EpimAb’s Fabs-In-Tan-dem Immunoglobulin (FIT-Ig) technology to generate bispecific antibodies combined with antibodies discovered with Kymab’s Kymouse transgenic mouse platform. Epi-mAb has rights to develop and commercial-ize the resulting antibodies in China, while Kymab gets rights in the rest of the world. Each company will receive milestones and royalties from the other based on certain achievements.

EUROFARMA LABORATORIOS SAEISAI CO. LTD.Morphotek Inc.Eisai Co. Ltd.’s Morphotek Inc. subsidiary granted Brazilian generics firm Eurofarma Laboratorios SA exclusive Latin American rights to develop and sell its monoclonal an-tibody farletuzumab for ovarian cancer. (Oct.)Eurofarma pays money up front, develop-ment and sales milestones, and royalties. Farletuzumab is a folate receptor alpha antagonist currently in a Phase II trial in first-relapsed platinum-sensitive ovarian cancer in patients with low levels of the ovarian cancer biomarker CA125. The trial is studying the candidate in combination with standard chemotherapy to investigate safety and efficacy. Morphotek will supply Eurofarma with clinical and commercial materials, and Eurofarma has the option to take over filling and packaging vials.

FIMBRION THERAPEUTICS INC.GLAXOSMITHKLINE PLCGlaxoSmithKline PLC and biotech start-up Fimbrion Therapeutics Inc. are collaborat-ing to develop a small-molecule drug for treatment and prevention of urinary tract infections. Strategic Transactions assumes that GlaxoSmithKline will hold licensing rights to the resulting drugs. (Oct.)The partnership will focus on preclinical de-velopment of a class of mannose-containing small-molecules known as mannosides, which may be able to treat UTIs without inducing antibiotic resistance. Fimbrion’s FimH protein acts like “molecular Velcro” allowing bacteria to adhere to receptors on the bladder wall instead of being flushed by urine. Current options to treat bacterial infections are limited

due to large increases in antibiotic resistance. Fimbrion was founded in 2012 by Scott Hult-gren, James Janetka, and Thomas Hooton and is based on IP licensed from Washington University in St. Louis.

GLAXOSMITHKLINE PLCZAI LAB LTD.GlaxoSmithKline PLC licensed Zai Lab Ltd. global rights to two anti-inflammatory candidates. (Oct.)The agreement gives Zai development and commercialization rights to one Phase II and one preclinical asset, both focused on combatting inflammation. Although further details on the agreement have not been dis-closed, GSK’s current pipeline contains 16 already marketed drugs for inflammation and three candidates in active development. This partnership comes on the heels of a Septem-ber 2016 deal in which Tesaro licensed Zai exclusive rights to cancer candidate nirapa-rib in China. Zai has taken five novel drug candidates (including ZL2102 (licensed from Sanofi) and ZL1101 (licensed from UCB)), and three cancer compounds into clinical trials in China and brought the first China-discovered drug into global Phase III trials.

INNOVUS PHARMACEUTICALS INC.SEIPEL GROUP PTy. LTD.Innovus Pharmaceuticals Inc. licensed exclusive worldwide rights to Seipel Group Pty. Ltd.’s Urox for overactive bladder (OAB) and urinary incontinence (UI). (Oct.)Urox, which had 2015 sales of $1mm, is an over-the-counter herbal supplement contain-ing a combination of Crataeva nurvala stem bark (Seipel’s Cratevox specialized extract to increase smooth muscle tone of bladder wall and aid in emptying and refilling the bladder), Equisetum arvense stem (horsetail; to promote sphincter control and diuretic properties to maintain healthy urination frequency), and Lindera aggregata root (an antioxidant for maintaining urinary tract tone and function). Urox has demonstrated in multiple double-blind clinical trials the ability to reduce urge and stress incontinence, urinary frequency and urgency, and nocturia in male and female OAB and UI patients. Innovus Pharma will pay SG an up-front payment and has committed to purchasing annual supplies of the product, which it will rename UriVaRx. Innovus will market it using its Beyond Human direct-to-consumer marketing platform and aims to triple the drug’s sales. UriVaRx adds a new therapeutic area to Innovus’ portfolio of OTC products, which already includes mainly men’s and women’s sexual and reproductive health products, as well as offerings in health supple-ments, pain, respiratory, and vision care.

INTELLIPHARMACEUTICS INTERNATIONAL INC.MALLINCKRODT PLCUnder a 10-year agreement, Mallinckrodt PLC licensed exclusive US rights to market, sell, and distribute three of Intellipharma-

ceutics International Inc.’s oral extended-release generic neurology candidates. (Oct.)Intellipharmaceutics applies its multiple Hypermatrix controlled-release drug de-livery technologies to both existing and new pharmaceuticals across a broad range of therapeutic areas. The deal includes dopamine receptor antagonist quetiapine fumarate, for which the company just an-nounced tentative ANDA approval by the FDA. A generic to AstraZeneca’s Seroquel XR, quetiapine fumarate is indicated for schizophrenia, bipolar disorder, and major depressive disorder (MDD). The two other candidates--both of which have ANDAs un-der FDA review--are desvenlafaxine (a generic to Pfizer’s Pristiq), a selective sero-tonin and norepinephrine reuptake inhibi-tor for MDD, and lamotrigine (a generic to GlaxoSmithKline’s Lamictal XR), a sodium channel antagonist for epilepsy. Intelli-pharmaceutics will exclusively manufacture the drugs and be the sole US supplier for Mallinckrodt, which pays $3mm up front and boosts its existing heavily neuro-focused generics portfolio. The deal also includes a long-term profit sharing arrangement under which Intellipharmaceutics could get up to $11mm in cost recovery payments. Last year Intellipharmaceutics signed a similar alliance with Teva, which licensed US rights to an undisclosed extended-release generic under ANDA review, but that deal was termi-nated earlier this year because the subject of the agreement did not receive FDA regu-latory approval by the agreed-upon date.

JAPAN TOBACCO INC.Torii Pharmaceutical Co. Ltd.Torii Pharmaceutical Co. Ltd. licensed exclu-sive Japanese rights to co-develop and sell Japan Tobacco Inc.’s dermatology project JTE052. (Torii is majority-owned by JT.) (Oct.)JTE052, a Janus kinase (JAK) inhibitor, is in Phase II trials as a topical atopic dermatitis therapy. Torii pays money up front plus milestones. In addition to renal diseases, allergens, and HIV infection, dermatology is one of Torii’s main therapy areas. Offerings include ointments, creams, and lotions for atopic dermatitis, contact dermatitis, and tinea pedis, as well as products related to skin reactions from allergen exposure.

JAPAN TOBACCO INC.JW PHARMACEUTICAL CORP.Japan Tobacco Inc. (JT) granted JW Pharma-ceutical Corp. exclusive rights to develop and sell JTZ951 in the Republic of Korea for anemia associated with chronic kidney disease. (Oct.)JTZ951 is a hypoxia-inducible factor-prolyl hydroxylase protein inhibitor in Phase II trials in Japan; it works by enhancing production of endogenous erythropoietin and promoting red blood cell production. Shortly after the deal with JW, JT also announced that it grant-ed Torii Pharmaceutical exclusive rights to co-develop and sell JTE052 in Japan for

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dermatology conditions. That collaboration carries up-front and milestone payments.

JOHNSON & JOHNSONJanssen Pharmaceutica NVPIRAMAL ENTERPRISES LTD.Piramal Enterprises Ltd. is paying $155mm in cash for five of Janssen Pharmaceutica NV’s anesthesia and pain management injectables. Janssen could also receive $20mm should the products achieve certain agreed-upon financial milestones over the next 30 months. (Oct.)The acquired products are the pain medica-tions Sublimaze (fentanyl citrate), Sufenta (sufentanil citrate), and Dipidolor (piritra-mide); anesthetic Hypnomidate (etomidate); and Rapifen (alfentanil hydrochloride) for both pain and anesthesia. (All except Hypn-omidate are controlled substances.) Piramal gets rights to the brand names and all related intellectual property, including the know-how to make both their active pharmaceutical ingredients and finished dosage forms. Janssen will supply finished dosage forms for up to three years and the APIs for up to five years. In addition, it will continue to sell the products on behalf of Piramal until the marketing authorizations or relevant busi-ness relations are transferred. The drugs are already being sold in more than 50 countries worldwide and generated net sales of $45mm for the last 12 months. Piramal claims it’s the third largest player in the worldwide inhala-tion anesthesia market. Earlier this year the company paid $16.4mm for four of Pfizer’s popular brands.

LUPIN LTD.Lupin Pharmaceuticals Inc.MONOSOL RX LLCMonoSol Rx LLC and Lupin Ltd.’s Lupin Pharmaceuticals Inc. US division, which specializes in medications for children, will collaborate on the development of pediatric formulations using MonoSol’s PharmFilm delivery platform. (Oct.)The technology is designed to enable more precise dosing and improved efficacy and safety through a fast-dissolving, taste-masked, and easy-to-administer oral thin-film formulation. MonoSol already markets two products that incorporate the PharmFilm platform: Suboxone (buprenor-phine and naloxone) sublingual (under-the-tongue) film for opioid dependency and anti-emetic Zuplenz (ondansetron), an oral soluble film. Under the current deal, Lupin will apply the PharmFilm technology to multiple undisclosed pediatric medicines. Although specific drugs were not revealed, Lupin hinted at the attention-deficit/hyper-activity disorder (ADHD) market; it looks to expand its products for children in this therapeutic area as well as in other indica-tions. Its pediatric portfolio already includes methylphenidate hydrochloride chewable tablets for ADHD; Alinia (nitazoxanide) anti-diarrheal tablets and oral suspension;

Suprax (cefixime) cephalosporin antibacte-rial; and the InsiraChamber device for aero-sol delivery of allergy or asthma therapies.

MERCK KGAAPFIZER INC.INSTITUT MERIEUXTransgene SATransgene SA entered into a trial collabo-ration to evaluate its immunotherapeutic TG4001 (tipapkinogene sovacivec) with Merck KGAA’s and Pfizer Inc.’s avelumab in a Phase I/II study for human papilloma virus (HPV)-positive head and neck squamous cell carcinoma. (Oct.)Transgene is developing TG4001, a human papillomavirus 16 (HPV16) E6 and E7 inhibi-tor, in Phase II trials for cancers caused by the HPV virus, including head and neck. Under a 2014 co-development and co-commercialization deal, Merck and Pfizer are developing avelumab, an anti-PD-L1 IgG1 monoclonal antibody, in a variety of Phase III studies for tumors including non-small cell lung, esophageal, stomach, ovarian, renal, and bladder cancers, as well as earlier trials for carcinoma, melanoma, Hodgkin’s lymphoma, and breast, colorectal, and prostate cancers. Transgene notes that preclinical studies of TG4001 and avelumab suggest that together, the compounds could be effective at treating HPV-positive head and neck cancers. Transgene will sponsor the initial Phase I/II trial.

MERCK KGAAVACCINEX INC.Merck KGAA and Vaccinex Inc. entered into a clinical trial collaboration to investi-gate the combination of Merck’s avelumab with Vaccinex’ VX15/2503 for patients with advanced non-small cell lung cancer who have not been previously treated with an immunotherapy. (Oct.)Vaccinex has VX15/2503, an anti-semapho-rin 4D IgG4 monoclonal antibody, in Phase I trials for solid tumors; the company notes that early studies have already indicated the compound’s potential for use in combina-tion therapies. Avelumab (jointly developed by Merck and its partner Pfizer) is in Phase III for a number of solid tumors including NSCLC, stomach, esophageal, ovarian, renal, and bladder cancers, as well as ear-lier trials for Merkel cell carcinoma, breast, prostate, colorectal, and blood cancers. Vaccinex will conduct a planned Phase Ib/II trial of the avelumab/VX15/2503 combo.

METUCHEN PHARMACEUTICALS LLCVIVUS INC.Metuchen Pharmaceuticals LLC licensed exclusive commercialization rights in the US, Canada, South America, and India to Vivus Inc.’s Stendra (avanafil)--an oral phos-phodiesterase-5 inhibitor with a rapid onset of action for erectile dysfunction--which was approved in the US in 2012 and in Europe (where it’s known as Spedra) in 2013. (Oct.)

Vivus initially licensed exclusive worldwide development and commercialization rights (except in certain Pacific Rim countries) to avanafil from Mitsubishi Tanabe Pharma, under a 2001 agreement when the drug was in Phase I. Vivus paid $5mm up front for the license at that time, but is still obli-gated to pay royalties on net sales. Under an October 2013 deal (which was worth up to $285mm), Endo’s Auxilium Pharmaceuticals had exclusive US and Canadian marketing rights, but that license was terminated in 2015 and the rights to Stendra in those ter-ritories were returned to Vivus last month. Vivus’ other Stendra/Spedra marketing partners--which also signed agreements during 2013--are Sanofi, which holds rights in Africa, the Middle East, Turkey, and the CIS (for $5mm up front and up to $56mm more in milestones), and Menarini, with a license in over 40 European countries, Australia, and New Zealand (for $21mm up front and a potential $102 in milestones). In the current deal, Metuchen gains rights in the selected countries in exchange for $70mm up front, plus reimbursement of milestones and royalties paid by Vivus to Mitsubishi Tanabe. Metuchen may also con-duct development activities (including any post-regulatory studies required by the FDA) to support any pending approvals within its licensed regions. Concurrently, the partners entered a commercial supply agreement under which Vivus will handle manufactur-ing and supply of Stendra to Metuchen for an agreed-upon term; Metuchen has six months to decide if it will exercise an option to assume manufacturing and supply rights within its designated territories.

MyOVANT SCIENCES LTD.PFIZER INC.Under a deal concurrent with the closing of its $202mm initial public offering, Myovant Sciences Ltd. granted an affiliate of Pfizer Inc. the right of first negotiation (ROFN) to a sublicense to two male and female health drug candidates Myovant previously in-li-censed from Takeda Pharmaceutical. (Oct.)The compounds are relugolix (TAK385) and RVT602 (TAK448), two of Takeda’s discontin-ued pipeline programs, which the Japanese Big Pharma licensed exclusive worldwide rights (except in Japan and certain Asian countries) to Myovant when it launched the start-up in June 2016. Relugolix is an oral gonadotropin-releasing hormone (GnRH) receptor antagonist in Phase III for uterine fibroids and endometriosis, and in Phase II for advanced prostate cancer. The Phase I RVT602 is an oligopeptide kisspeptin analog alternative to human chorionic gonadotro-pin for female infertility. For a three-year period, Pfizer will have the ROFN to develop and commercialize both candidates in a ma-jor market country in indications including heavy menstrual bleeding associated with uterine fibroids, endometriosis-associated pain, advanced prostate cancer, or female

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infertility as part of assisted reproduction. In exchange for the option, Pfizer purchased 2mm Myovant shares in the IPO at the IPO price of $15 for a total of $30mm. The shares are subject to a 180-day lock-up agreement with the underwriters. One representative of Pfizer will act as a non-voting observer on the Myovant board during the ROFN period, but this arrangement is terminated prior to that if Myovant is first acquired or files an NDA for relugolix.

NOVARTIS AGPERLARA PBCPerlara PBC (previously Perlstein Lab; rare dis-ease drug discovery platform) and Novartis AG will collaborate on the discovery of lysosomal storage disorder (LSD) treatments. (Oct.)Perlara launched in February 2014 and soon after completed a seed round in which rare disease therapeutics firm Retrophin contrib-uted. The company’s platform uses CRISPR gene editing to model human disease in animals such as yeast, nematodes, fruit flies, and zebrafish, which share genetic similarities with humans. The CRISPR-en-gineered disease models are incorporated into phenotypic cell-based screens that rapidly (and less expensively) evaluate thousands of compounds for specific muta-tions, using a predictive engine to generate and identify the best potential orphan drug candidates. Perlara has identified at least 250 single-gene diseases and already has in its pipeline the preclinical PERL101 for Niemann-Pick Type C (NPC) disease and a N-glycanase 1 (NGLY1) deficiency compound in discovery. Novartis made an equity invest-ment in the company and the partners will first work on lead NPC small-molecule can-didate PERL101, which has shown positive oral bioavailability and stability in mouse validation studies. Novartis concurrently announced a separate collaboration with an-other discovery biotech, Cerulean, in which it will pay $1.2bn to use Cerulean’s Dynamic Tumor Targeting nanoparticle-drug conju-gate technology platform to develop up to five cancer candidates.

OCULAR THERAPEUTIX INC.REGENERON PHARMACEUTICALS INC.Ocular Therapeutix Inc. and Regeneron Pharmaceuticals Inc. are teaming up to develop a sustained-release formulation of aflibercept for wet age-related macular degeneration (wet AMD) and other serious retinal diseases. (Oct.)Aflibercept targets the vascular endothelial growth factor (VEGF) and is sold by Regen-eron under the Eyelea brand. The version that Ocular and Regeneron will work on is currently in preclinical studies and will use Ocular’s sustained-release hydrogel-based drug delivery depot formulation for intravit-real injection. (Ocular is already using the technology in developing a sustained-re-lease version of bevacizumab (Genentech’s Avastin), also in preclinical studies for wet

AMD.) The new aflibercept will have a dosing regimen of just two or three times per year as opposed to every-other month. Under the agreement, Regeneron has the option to license exclusive rights to use Ocular’s technology to develop and commercialize sustained-release aflibercept and other biologics targeting VEGF for ophthalmic indi-cations. Ocular keeps rights to the hydrogel-based drug delivery platform for develop-ing non-VEGF-targeting compounds and small-molecules including tyrosine kinase inhibitors (TKIs) for other retinal diseases. Should Regeneron exercise the option, it would pay $10mm, and Ocular Therapeutix would fund development through Phase I, after which time Regeneron would take over and finance further development and commercialization. Ocular would be eligible for up to $305mm in milestones--$155mm for development and regulatory achieve-ments, $100mm upon the first commercial sale, and $50mm in additional commercial milestones--plus tiered high-single-digit to mid-teen-digit royalties (Strategic Transac-tions assumes 8-15%).

SAREPTA THERAPEUTICS INC.SUMMIT THERAPEUTICS PLCSarepta Therapeutics Inc. gained exclusive EU rights to Summit Therapeutics PLC’s oral utrophin modulator ezutromid (SMTC1100) for the muscle-wasting disease Duchenne muscular dystrophy (DMD). Sarepta’s li-cense also includes Switzerland, Norway, Iceland, Turkey, and the Commonwealth of Independent States, as well as an option to Latin American rights. (Oct.)In addition, Sarepta has rights within the same territories (and also applying to its op-tion for Latin America) to second-generation and future small-molecule utrophin modula-tors from Summit’s pipeline. In exchange for the license, Sarepta will pay Summit $40mm up front; $42mm in development milestones (including $22mm upon the first dosing of the last patient in the current SMTC1100 Phase II trial, payable on or after April 1, 2017); $150mm in regulatory milestones re-lated to ezutromid; additional development ($65mm) and regulatory ($225) milestones on any next-generation utrophin modulators developed; sales milestones of $330mm; and tiered, escalating royalties ranging from the low to high teens (Strategic Transac-tions assumes 13-19%) within the licensed territories. If Sarepta chooses to license Latin American rights (which it can do three months following regulatory approval in the US or EU), it will pay an additional $17mm for the option exercise and specific regulatory milestones, $82.5mm in sales milestones, and the same tiered, 13-19% escalating royalty range as in the other territories. Summit will fund all R&D through 2017 and, starting in 2018, the partners will split R&D costs 45/55 (Sarepta/Summit). Discovered by Professor Kay Davies at the University of Oxford (and licensed to Summit in an

ongoing collaboration recently extended through 2019), the DMD utrophin modula-tion program aims to use small-molecule drugs to increase the production of the utrophin protein, which is functionally and structurally similar to dystrophin gene (the mutation of which leads to the disease) to slow down or stop DMD progression. The collaboration with U of O has identified vari-ous utrophin modulator compounds distinct from SMTC1100. Granted both FDA rare pe-diatric disease and fast-track designations as well as orphan drug status by both the FDA and the EMA, SMTC1100 is currently in a Phase II US and European proof-of-concept trial (entitled PhaseOut DMD), which will measure in muscle biopsies both utrophin modulation (using muscle fat infiltration) and utrophin protein and muscle fiber re-generation. Under a 2008 deal, BioMarin had an exclusive worldwide license to the compound (then in preclinical development) but returned the rights in 2010, citing phar-macokinetic challenges following Phase I. Summit’s SMTC1100 adds a candidate with another mechanism of action to Sarepta’s DMD pipeline; Sarepta just last month (con-current with a $328mm follow-on offering) received the FDA nod (under the acceler-ated approval pathway) for its Exondys 51 (eteplirsen) DMD drug, which skips exon 51 of the dystrophin gene, thus repairing the mutation in the mRNA sequence. A recent partnership with Catabasis Pharmaceuti-cals involves the joint R&D of a combination DMD therapeutic using Sarepta’s Exondys 51 in conjunction with Catabasis’ Phase II CAT1004 (edasalonexent), an oral nuclear factor kappa B (NF-kB) inhibitor.

TAIGEN BIOTECHNOLOGy CO. LTD.yICHANG HEC CHANGJIANG

PHARMACEUTICAL CO. LTD.TaiGen-YiChang HEC JVTaiGen Biotechnology Co. Ltd. and yiChang HEC ChangJiang Pharmaceutical Co. Ltd. have created a Chinese joint venture to develop, manufacture, and commercialize direct-acting antiviral agents (DAAs) for treating chronic hepatitis C virus (HCV) in mainland China, Taiwan, Hong Kong, and Macau. (Oct.)The companies signed the memorandum of understanding back in February but have now finalized the agreement. The JV will be the first of its kind involving pharmaceutical companies on both sides of the Taiwan strait. The new firm will capitalized at RMB680mm ($102mm) and be initially owned 49% by TaiGen and 51% by YiChang. The JV gains TaiGen’s HCV NS3 protease inhibitor furaprevir (TG2349), which is finishing up a Phase II trial in Taiwan. YiChang contributes its Phase I NS5a inhibitor yimitasvir (DAG181). TaiGen will handle research, clinical development, and registration of a furaprevir/yimitasvir HCV treatment, while HEC is responsible for operation, manufacturing, and sales and

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marketing activities. Based on results from Phase II trials, YiChang will provide TaiGen with $20-40mm and after the share transfer is complete TaiGen will hold a 40% equity stake in the JV and YiChang the remaining 60%. Ultimately the parties seek to create all-oral interferon-free DAA-based HCV treat-ments, of which there are currently none approved in mainland China.

Financings/Pharmaceuticals

ADVANCED ACCELERATOR APPLICATIONS SAAdvanced Accelerator Applications SA (nuclear medicine) netted $141mm in a pub-lic offering of 3.9mm American Depository Shares (each ADS is equal to two ordinary shares) at $38. The company will use the proceeds to support clinical trials and R&D for its pipeline, including Lutathera in ad-ditional indications, and Annexin V-128, PSMA, and NEOBOMB1; to expand the commercial launches for Lutathera and Somakit; and to increase manufacturing infrastructure. (Oct.)Investment Banks/Advisors: Canaccord Genuity Inc.; JMP Securities LLC; JP Morgan & Co.; Jefferies & Co. Inc.; Wells Fargo Se-curities LLC

AETERNA ZENTARIS INC.AEterna Zentaris Inc. completed a regis-tered direct offering, netting $7mm through the sale of 2.1mm units at $3.60 apiece (a 19% discount). Each unit consisted of one common share and 0.45 of a common share purchase warrant, exercisable at $3.60 for three years. Proceeds will support filing of NDAs for lead projects Macrilen (macimo-relin) for adult growth hormone deficiency and Zoptrex (zoptarelin doxorubicin) for endometrial cancer; regulatory submis-sions are expected during the first half of 2017. Earlier this month, AEterna signed on Specialised Therapeutics to sell Zoptrex in Australia and New Zealand. (Oct.)Investment Banks/Advisors: Aegis Capital Corp.; Maxim Group LLC; Rodman & Ren-shaw Capital Group Inc.

ASCENDIS PHARMA ASDanish drug delivery firm Ascendis Pharma AS netted $112.8mm through the public of-fering of 6.3mm American Depositary Shares (each ADS is equal to one ordinary share) at $19. The company will use the proceeds to finish clinical development and gain regu-latory approval for its growth hormone and for ongoing development of a parathyroid hormone and C-Type natriuretic peptide. Ascendis’ candidates were created using its TransCon sustained-release technol-ogy. (Oct.)Investment Banks/Advisors: Bank of America Merrill Lynch; Credit Suisse Group; JP Morgan & Co.; Wedbush PacGrow Life Sciences

AZURRX BIOPHARMA INC.AzurRx BioPharma Inc. (developing oral non-systemic recombinant proteins for gastrointestinal and microbiome-related dis-eases) netted $4.8mm in its initial public of-fering of 960k common shares at $5.50 each. (At one point the company planned to sell 2.14mm shares between $6 and $8.) (Oct.)Investment Banks/Advisors: Network 1 Financial Securities Inc.; ViewTrade

CERULEAN PHARMA INC.On the same day Cerulean Pharma Inc. signed a $1.2bn collaboration with Novar-tis to develop up to five nanoparticle-drug conjugate (NDC) cancer candidates, the biotech also entered an at-the-market com-mon stock purchase agreement with Aspire Capital Fund, in which it could get up to $20mm. Aspire already bought 800k shares at $1.25 (a 42% premium) and Cerulean has the right to sell to Aspire the remain-ing $19mm (at the company’s discretion in increments not exceeding $300k) over the agreement’s two-year term. Cerulean also issued Aspire 700k commitment shares. The company will use the proceeds to continue clinical development of its NDC pipeline, which includes Phase II topoisomerase 1 inhibitor CRLX101 (camptothecin) for ovarian and other solid tumor cancers and Phase I/II CRLX301 (docetaxel) for solid tumors. (Oct.)

CIDARA THERAPEUTICS INC.Infectious disease-focused Cidara Thera-peutics Inc. netted $27mm through the follow-on sale of 2.75mm common shares (including the overallotment) at $10.10 each. The company will use the proceeds for ongoing clinical trials of Phase II CD101 IV and CD101 topical antifungal candidates, to finish IND-enabling studies for its CD201 antibacterial, and to expand its Cloudbreak immunotherapy technology platform. (Oct.)Investment Banks/Advisors: Cantor Fitzger-ald & Co.

CRISPR THERAPEUTICS AGCRISPR Therapeutics AG (genome editing focused on CRISPR/Cas9-based therapeu-tics) netted $52mm in its initial public offer-ing of 4mm shares at $14 (down-sized and below the anticipated price range) on the Nasdaq. Concurrently, the company raised $35mm through the sale of 2.5mm shares to development partner Bayer through a private placement offering. (Oct.)Investment Banks/Advisors: Barclays Bank PLC; Citigroup Inc.; Guggenheim Partners LLC; Piper Jaffray & Co.

CRISPR THERAPEUTICS AGCRISPR Therapeutics AG raised $35mm through the sale of 2.5mm shares in a private placement offering to development partner Bayer through Bayer Global Invest-ments BV, an affiliate of Bayer Healthcare LLC. (Oct.)

DyNAVAX TECHNOLOGIES CORP.Dynavax Technologies Corp. (treatments for infectious, autoimmune, and inflam-matory diseases) entered into a committed financing agreement with Deerfield Manage-ment, under which Deerfield could purchase $100mm principal amount of Dynavax’s 10.375% five-year senior secured notes. Cantor Fitzgerald is the placement agent. The funding is contingent upon Dynavax’s receipt by the FDA of approval for Heplisav-B, an adult hepatitis B vaccine; the BLA is currently under review, with a PDUFA ac-tion date of December 15, 2016. Proceeds would fund general corporate purposes, including Heplisav-B commercialization activities. (Oct.)Investment Banks/Advisors: Cantor Fitzger-ald & Co.

GTX INC.GTx Inc. grossed $14mm through the regis-tered direct sale of 17.3mm common shares at $0.81 (a slight premium). The company is developing selective androgen receptor modulators for breast cancer (Phase II), stress urinary incontinence (Phase II), and Duchenne muscular dystrophy (preclinical), and also has a selective androgen receptor degrader in preclinical studies for prostate cancer. (Oct.)

HORIZON PHARMA PLCHorizon Pharma PLC (orphan, primary care, and rheumatology medicines) raised $300mm in senior notes due 2024. The notes bear an interest rate of 8.75% and will be used along with an existing senior secured credit facility to fund the company’s planned acquisition of Raptor Pharmaceu-tical. (Oct.)

IDERA PHARMACEUTICALS INC.Idera Pharmaceuticals Inc. (rare disease therapeutics) netted $47mm through the public sale of 25mm common shares at $2. Proceeds will support development of key pipeline assets including immuno-oncology compound IMO2125 (Phase I/II trials for refractory tumors including metastatic melanoma); IMO8400 (Phase II for the rare disease dermatomyositis); and the company’s 3GA (third-generation antisense) platform. (Oct.)Investment Banks/Advisors: Goldman Sachs & Co.; JMP Securities LLC; JP Mor-gan Chase & Co.; Wedbush PacGrow Life Sciences

IMMUNOMEDICS INC.Immunomedics Inc. (developing mono-clonal antibody therapies for cancer, au-toimmune conditions, and other diseases) netted $28.8mm through the public offering of 10mm common shares at $3. Investors also received two-year warrants to buy 10mm more shares at $3.75. Funds will sup-port pipeline project IMMU132, including late-stage development activities and NDA

In VIVo: The Business & Medicine Report [ISSN 2160-9861] is published monthly, except for the combined July/August issue, by Informa Business Intelligence, Inc., 52 Vanderbilt Avenue, 11th floor, New York, NY 10017. Tel: 888-670-8900(US); +1-908-547-2200 (outside US); fax: 646-666-9878.

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submission for metastatic triple-negative breast cancer. (Oct.)Investment Banks/Advisors: Wells Fargo Securities LLC

MyOVANT SCIENCES LTD.Just four months after its inception, start-up Myovant Sciences Ltd. (men’s and women’s health therapeutics) netted $202mm in an initial public offering of 14.5mm shares at $15, the high end of its anticipated range, and up-sized from its original 13mm shares. This marks the largest biotech IPO so far this year. (Oct.)Investment Banks/Advisors: Barclays Bank PLC; Citigroup Inc.; Cowen & Co. LLC; Ever-core Partners; JMP Securities LLC; Robert W. Baird & Co. Inc.

NEKTAR THERAPEUTICSNektar Therapeutics netted $165mm in a follow-on public offering of 13mm common shares at $13.50. The company will use the proceeds to fund research and develop-ment, particularly for candidates NKTR181 (Phase III for chronic pain), NKTR102 (Phase II for advanced metastatic breast cancer), NKTR214 (Phase I/II immuno-oncology for solid tumors), and NKTR358 (preclinical for autoimmune diseases). (Oct.)Investment Banks/Advisors: BTIG LLC; Brean Capital LLC; JP Morgan & Co.; Janney Mont-gomery Scott Inc.; Jefferies & Co. Inc.; Lad-enburg Thalmann & Co. Inc.; Piper Jaffray & Co.; Roth Capital Partners; William Blair & Co.

PROBI ABProbiotics developer Probi AB grossed SEK601.6mm ($70mm) through a rights of-fering of 2.28mm shares at SEK264 (a 24% discount). Symrise, Fjarde AP-fonden, Swed-bank Robur Fonder, and Handelsbanken Fonder subscribed in the rights issue. (Oct.)Investment Banks/Advisors: Handelsban-ken Markets

PUMA BIOTECHNOLOGy INC.Oncology drug in-licenser Puma Biotechnol-ogy Inc. netted $162mm through the public sale of 4.3mm common shares (including the overallotment) at $40. (Oct.)Investment Banks/Advisors: Bank of America Merrill Lynch; Citigroup Inc.; Credit Suisse Group; JP Morgan Chase & Co.; Stifel Nicolaus & Co. Inc.

RA PHARMACEUTICALS INC.Ra Pharmaceuticals Inc. netted $85.2mm in its initial public offering through the sale of 7.05mm shares at $13 (upsized; midpoint of range). (Oct.)Investment Banks/Advisors: BMO Financial Group; Credit Suisse Group; Jefferies & Co. Inc.; SunTrust Banks Inc.

RITTER PHARMACEUTICALS INC.Ritter Pharmaceuticals Inc. (developing therapies that modulate the gut microbiome to treat gastrointestinal diseases) netted

$4.65mm through the public offering of 2.13 common shares at $2.35. (Oct.)Investment Banks/Advisors: Aegis Capital Corp.

SCyNEXIS INC.Solar Capital provided Scynexis Inc. (anti-infectives) with a $15mm term loan. The secured term loan is for a period of 48 months (maturing on Sept. 30, 2020) and bears a floating interest rate equal to LIBOR + 8.49%. The loan is interest-only through April 1, 2018 and principal payments can be deferred for an additional six months if the company receives certain positive clinical data prior to March 31, 2018, and receives unrestricted net cash proceeds of not less than $20mm after Sept. 8, 2016. Scynexis also has the right to prepay the loan. The company also issued a warrant to Solar to purchase up to 122.4k common shares at an exercise price of $3.6754 for up to five years. Concurrent with the financing, the company concurrently announced positive Phase II results of its oral SCY078 in vul-vovaginal candidiasis and invasive candi-diasis. Scynexis will use proceeds from the financing to expand the indications for the compound. (Oct.)Investment Banks/Advisors: Armentum Partners

SUNESIS PHARMACEUTICALS INC.Oncology therapeutics developer Sunesis Pharmaceuticals Inc. netted $26.2mm through the public sale of 5.7mm common shares (including the overallotment) at $3.85 and 1,558 Series C preferred shares at $1k. (Each Series C share converts into 1k common as long as the stockholder’s result-ing ownership stake doesn’t exceed 9.98% following the conversion.) Proceeds will support clinical development of SNS062, a BTK inhibitor entering Phase I for B-cell malignancies, and regulatory development of vosaroxin for AML in Europe. (Oct.)Investment Banks/Advisors: Cowen & Co. LLC; Wells Fargo Securities LLC

THERAVANCE BIOPHARMA INC.Theravance Biopharma Inc. (treatments for infectious, respiratory, cardiovascular, and gastrointestinal diseases) netted $288mm through concurrent public offerings of its common stock and debt. In the first trans-action, the company sold 3.85mm common shares at $26 for net proceeds of $94mm, while in the second, it sold $200mm prin-cipal amount ($194mm net) of its 3.25% senior notes due 2023. The notes convert to common at a rate of 29.0276 shares per $1k, or about $31.84 per share. (Theravance’s stock averaged $31.70 at the time of the sale.) (Oct.)Investment Banks/Advisors: Cantor Fitzger-ald & Co.; Evercore Partners; Guggenheim Partners LLC; Leerink Partners LLC; Need-ham & Co. Inc.; Piper Jaffray & Co.

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