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Is pharmaceutical giant Pfizer Inc. effectively paying off Indian generics manufacturer Ranbaxy Laboratories to delay its launch of a generic version of Pfizer’s blockbuster cholesterol drug Lipitor?

That’s likely the question on the minds of the Federal Trade Commission and the Department of Justice after Pfizer announced Wednesday that it agreed to settle all of its patent litigation worldwide with Ranbaxy involving Lipitor. 

Under the terms of the agreement, Ranbaxy will have a license to sell generic versions of the cholesterol-lowering medicine Lipitor and Caduet - a combination of Lipitor and high blood pressure medication Norvasc - in the U.S., effective November 30, 2011. The agreement also provides a license for Ranbaxy to sell generic versions of Lipitor on varying dates in seven additional countries.

The news provided a boost for Pfizer shares, which had been hitting yearly lows on an almost daily basis.

The deal provides market exclusivity for Pfizer on Lipitor and Caduet for 20 months more than Deutsche Bank analysts anticipated. The firm, which figured generic Lipitor would be on the market from March 2010, said the 20 extra months added potential revenue of about $5 billion to Pfizer’s coffers in both 2010 and 2011.

Goldman Sachs had anticipated generic entry in June 2011, later than Deutsche Bank anticipated, but still not as late as the deal provides. The firm now expects Pfizer to report earnings of $2.44 a share in 2011 instead of its previous forecast of $2.09 a share.

And almost more importantly than the tangible monetary advantages of the deal for Pfizer, it also gives the company time to build its pipeline, which is underdeveloped - especially considering all the patent expirations Pfizer faces from 2011 to 2013.

But before anyone counts their money, the FTC, DOJ and state officials will have their say. The regulatory bodies are likely to scrutinize the deal to make sure that there aren’t any reverse payments from Pfizer to Ranbaxy, which could be seen as pay-offs from the pharma company to delay a generic Lipitor from hitting the shelves.

The FTC has been actively trying to discourage reverse payments.

And though FTC and DOJ approval aren’t required for the settlement to go through, the agencies could pursue litigation to block the transaction if they think something untoward is going on.

Pfizer, however, said there aren’t any “red flags” in the settlement that would warrant such litigation, and the company is confident the deal is going to go through.

Of all forms of cancer, there is perhaps none as insidious and deadly as a brain tumor. Even with the best kind of care, the survival rate for brain cancer remains very small. The tumors are often undetected until they’re very difficult, or impossible, to treat.

Brain cancer was brought into the limelight this week with the revelation that U.S. Senator Edward Kennedy of Massachusetts had been diagnosed with glioblastoma multiforme - the most common and most aggressive type of primary brain tumor. Kennedy had suffered a seizure a few days before, and doctors discovered the tumor in his left parietal lobe as they tried to find the cause of the seizure.

Kennedy’s doctors said that the usual course of treatment for a malignant glioma includes various combinations of radiations and chemotherapy. However, at 75, Kennedy will be hard to treat, the doctors said. And surgery is dangerous, even in the best cases, because of the risk of damage to other parts of the brain and because gliomas tend to travel to other sections.

So does this mean that brain cancer patients are out of luck?

Not if Genentech has anything to say about it.

The pharmaceutical company already has a popular cancer drug on the market called Avastin, which the Food and Drug Administration has approved for the treatment of metastatic colorectal cancer, metastatic breast cancer and non-small cell lung cancer. And later this year, the company will submit a supplemental biologics license application (sBLA) to the FDA to add the treatment of glioblastoma multiforme as a regulated indication for the drug.

Avastin - the first drug of its kind - works by blocking the formation of blood vessels and inhibiting tumor growth. Choke off the blood supply and tumors shrink. Combine that with chemotherapy and tumors shrink without being able to grow back - that’s the idea, at least.

On May 15, Genentech said results from a Phase II study of Avastin administered alone or in combination with irinotecan chemotherapy showed ecouraging survival rates and, more importantly, progression-free survival.

According to the company, 43% of glioblastoma patients treated with Avastin alone and 50% of patients treated with Avastin and chemotherapy lived without the disease advancing for six months. Historical estimates suggest only 15% of patients with glioblastoma multiforme would be expected to live without their cancer advancing within six months.

And there seems to be little doubt that Genentech will be given FDA approval to add the brain cancer indication to Avastin’s label.

“If the company recieves fast track designation for this indication (a likely prospect), the drug could be labeled for glioblastoma multiforme sometime during the second half of 2009,” Rodman & Renshaw analyst Michael King said. “Our sales estimate in 2015 calls for worldwide sales of Avastin in this indication of about $650 million.”

According to healthcare information company IMS Health, Avastin is already outdoing other cancer drugs in market share and total sales. From January to March 2008, Avastin was the No. 1-selling monoclonal antibody on the market with 33.3% market share and total sales of $594.6 million. That’s 12% growth over the same period in 2007. And total 2007 sales of Avastin grew a whopping 32% over 2006 sales.

There are reports that some doctors have jumped the gun and are already using Avastin off-label with regular chemotherapy to treat brain tumors. But that’s not entirely uncommon, especially for cancer patients. As long ago as 1991, a study done by the U.S. General Accounting Office found that one-third of all drug administration to cancer patients was off-label and that more than half of cancer patients received at least one drug for an off-label indication.

Rodman & Renshaw’s proprietary data source, Oncology Inc. shows that about 2.5% of Avastin use in April was for off-label usage, King said. It’s not much, overall, but it does indicate that Avastin’s myriad uses have not been tapped out.

If the new indication is approved, Genentech is in for a windfall. And Ted Kennedy might have a brighter prognosis.

Warning: Quitting smoking may be hazardous to your health.

Wait, what?

According to a new report by non-profit health care watchdog group The Institute for Safe Medication Practices (ISMP), Pfizer Inc.’s smoking cessation drug Chantix could have worse side effects than just quitting cold turkey - psychosis, heart trouble, seizures, dizziness, loss of consciousness, abnormal spasms and movements, diabetes and suicidal tendencies. And drooling. And twitching - well, you get the point.

The ISMP studied reports of adverse effects turned into the Food and Drug Administration, including 988 “serious injuries” linked to Chantix in the United States during the fourth quarter of last year - more than any other individual drug in this time period, the report said.

There were reports of accidental injury, including road traffic accidents and falls, some leading to limb fractures, according to the ISMP. A variety of causes were identified, such as loss of consciousness and mental confusion. There were forms of blindness, some cardiac arrhythmias, seizures, muscle spasms and hives. There were also some reports suggesting the drug may be related to a loss of glycemic control and symptoms consistent with new onset diabetes.

“We have immediate safety concerns about the use of varenicline [the Chantix molecule] among persons operating aircraft, trains, buses and other vehicles, or in other settings where a lapse in alertness or motor control could lead to massive, serious injury,” the report said. “Other examples include persons operating nuclear power reactors, high-rise construction cranes or life-sustaining medical devices.”

Chantix has already been linked to suicide, the report added. And earlier this year, the drug was connected to serious psychiatric side effects such as hallucinations, paranoia and psychosis, and was undergoing an FDA review for psychiatric safety and labeling changes.

“These data provide a strong signal that the risks of varenicline treatment have been underestimated,” the ISMP concluded. “We recommend doctors and patients exercise caution in the use of varenicline and consider alternative methods of smoking cessation.”

On Wednesday, the Federal Aviation Administration banned the use of of Chantix by pilots and air traffic controllers after examining the institute’s report, said FAA spokeswoman Alison Duquette. The agency had OK’d its use for pilots and air traffic controllers in July 2007. When reports of adverse psychiatric events began surfacing in November, the agency became wary of the drug. The ISMP’s report put the FAA over the edge.

“Based on the additional reports, we’ve decided to ban Chantix,” Duquette said. “Any pilots or air traffic controllers who were taking it have to stop and wait 72 hours before returning to work.”

On Thursday, the Federal Motor Carrier Safety Administration - which oversees the interstate trucking and bus industry - warned medical examiners against issuing licenses to truckers or commercial drivers who use Chantix.

The fact that there are psychiatric side effects isn’t surprising considering the way the drug works.

Chantix is a nicotine receptor partial agonist - it attaches to the same receptors in the brain that receive nicotine when a person smokes. Chantix blocks those receptors to prevent the nicotine from latching on and giving the smoker a nicotine high. The drug is different from other standard smoking-cessation methods - like the nicotine patch or gum - in that it doesn’t pump any more nicotine into the body, but it’s also different from quitting cold turkey because it releases small amounts of dopamine, mitigating the effects of nicotine withdrawal and making them easier to bear.

And considering that Chantix acts on the brain, Pfizer acknowledges that neuropsychiatric side effects are possible, but that it’s difficult, if not impossible, to conclude that the adverse events reported by the ISMP were all caused by the drug.

In an interview, senior medical director of Pfizer’s Chantix team, Dr. Martina Flammer, said the current Chantix label accurately reflects the product’s efficacy and safety profile, including a warning about certain neuropsychiatric events and a warning to be certain of the drug’s effects before driving and operating machinery. (Airplanes and large trucks aren’t specifically mentioned, but probably count as machinery.)

The ISMP’s report was based solely on a review of post-marketing adverse event reporting data, said Flammer’s colleague, Medical Director Dr. Anjan Chatterjee. In other words, because the events were reported outside of a controlled clinical study that compared the drug to a placebo, it’s very difficult to tell whether the side effects were caused by Chantix, a pre-existing condition, environmental factors or something else entirely.

Chatterjee said a Pfizer study tracking the drug’s side effects for 52 weeks - the drug is indicated for use for 12 weeks - showed that the reported nausea, bad dreams, headaches and difficulty sleeping were practically the same as during the 12 weeks that people took the drug, side effects common to many prescription medications.

But because Chantix acts on the brain, Chatterjee also said it is difficult to rule Chantix out as a possible cause of the adverse events.

“It’s almost impossible to draw any firm conclusions,” he said.

In the end, just about the only thing the ISMP and Pfizer seemed to agree on was that no matter what method they use, people need to stop smoking. Half a million people die every year in the U.S. from smoking-related diseases.

So the question isn’t whether or not you need to quit smoking. The question is, would you rather put up with bad dreams and muscle spasms or mood swings and weight gain while you kick the habit?

Merck executives were likely reaching for heartburn medication Tuesday after the Food and Drug Administration issued a non-approvable letter for the company’s new cholesterol drug candidate Cordaptive. The company’s shares fell more than 10% during the day on the unexpected news, and several analysts cut their share prices on the stock as it lost the moderate 7.6% gain it had made at the end of last week.

The company says it plans to meet with the FDA and submit additional information on Cordaptive so that the FDA can better assess the drug’s risks and benefits. Cordaptive contains extended-release niacin, which has long been known to lower bad cholesterol and raise the levels of good cholesterol. But niacin has unpleasant side effects, namely flushing of the face and neck that makes a menopausal hot flash look like a warm breeze. So Merck added laropripant, a flushing inhibitor, which makes the niacin nicer.

The company says it’s still confident the drug ultimately will be approved, but this latest setback only adds to troubles that have lately revolved around its cholesterol franchise. Now that the timing of the drug’s launch is even more uncertain, a few analysts are even taking it out of their short-term models for the company.

Credit Suisse Analyst Catherine Arnold said that without the drug, Merck’s late-state pipeline is “mediocre.”

Several analysts wondered in notes to clients whether the non-approvable letter was more fallout from the recent flap over cholesterol drug Vytorin and the disastrous ENHANCE study, which showed Vytorin to be no more effective at lowering levels of plaque in the carotid artery than Merck cholesterol blockbuster Zocor, now available as a cheaper generic.

And as the FDA now seems to be more cautious about approving new drugs, following recent criticism in the mainstream media that it doesn’t demand enough long-term data on certain drugs before approving them, some analysts said the FDA would likely wait for data from some outcomes trials the company is running before making a final decision.

This could take years.

But it was also the uncertainty about the reason for the FDA’s decision that bothered analysts. What is it that the FDA specifically objected to and what kind of information do they want to see now? That seems to be between Merck and the FDA - at least for now.

The good news for Merck is that it was able to maintain its 2008 earnings and revenue outlooks because Cordaptive didn’t play a big part in the year’s profit projections. Also helping the company’s cause is that the European Union’s Committee for Medicinal Products for Human Use adopted a positive opinion for the drug - called Tredaptive internationally - last week.

Can Merck, still hailed by analysts as having strong fundamentals and healthy near-term top-line drivers, deliver with its core drugs like HPV vaccine Gardasil, avoid problems with the rest of the drugs in its late-stage pipeline and deliver strong sales of Tredaptive in Europe? It’s a possibility that might offset the setback to a certain extent, until the FDA hands down an approval.

It’s a disease straight out of Fox’s hit show “House” - Wegener’s granulomatosis, an uncommon autoimmune disease that inflammes the blood vessels; a kind of vasculitis that affects the lungs, kidneys and other organs and requires long-term immune supression to prevent serious organ damage.

So what’s it doing in a Phase III trial for a hepatitis B vaccine?

That’s what biotechnology company Dynavax Technologies is asking itself after the Food and Drug Administration placed a clinical hold on the two investigational new drug applications for the investigational vaccine, Heplisav, it is jointly developing with pharma giant Merck & Co. after one subject who received Heplisav in a Phase III study was preliminarily diagnosed as having Wegener’s.

Administration of the vaccine has been suspended in the Phase II study in end stage renal diease subjects, the only study of Heplisav in which the injections were being administered actively. A total of about 2,500 people have been vaccinated with more than 5,000 doses of Heplisav in 10 clinical trials that have been conducted over the course of seven years. There were no prior reports of Wegener’s granulomatosis in these trials, the companies said.

And here’s where they could probably use the services of the fictional genius/doctor/curmudgeon: the Wegener’s diagnosis hasn’t been confirmed, nor does anyone know whether the patient contracted it because of the vaccine or because it was just a pre-existing condition. 

In the meantime, investors panicked at the thought the drug’s release might be substantially delayed - or that it might never get approval - sold Dynavax shares in huge volume on Tuesday. The stock fell 57% to a 52-week low of $2.19 in afternoon trading on volume of 2.49 million.

But analyst reactions were mixed on the gravity of the news and the impact it could have on the drug’s development. Merriman Curhan Ford downgraded Dynavax to neutral from buy, and recommended investors hold their shares pending clarity on the adverse event, including a confirmation of the diagnosis and a determination of whether the vaccine contributed to it.

Credit Suisse lowered its price target for Dynavax to $7 from $9, but maintained its outperform rating.  The process to confirm the diagnosis of Wegener’s, the process to determine whether the patient was predisposed to the disease or whether the vaccine had anything to do with its onset and a review by the FDA is likely to take several months, the firm said.  At the very least, the launch of Heplisav has been pushed back by six months, and the probability the drug will reach the market has been reduced to 50% from 90%. 

Bear Stearns, which maintained its outperform rating for Dynavax, was a bit more optimistic about Heplisav’s chances and said the true risk to the drug’s approvability is low. “Although the FDA hold could delay the program several months, in the absence of clear histopathological and antibody data, we are skeptical that the vasculitis is drug-related and even whether it is truly Wegener’s,” the firm said in a note to clients, noting that the drug hasn’t demonstrated a single case of any kind of vasculitis in all the previous trials. Bear remains optimistic that Heplisav will receive FDA approval in 2010. 

Do you own stock in Amgen Inc.? Feel like you’re not getting a high-enough value for your money? Then maybe you should prod the company’s management into making Amgen an acquisition target, Credit Suisse said Friday.

The brokerage explored the possibilities for Amgen if it were to be acquired by a bigger pharma company that could make better use of a promising new drug Amgen currently has in clinical trials.

The firm said it might be wishful thinking to consider Amgen an attractive acquisition target, considering the uncertainty surrounding the company’s anemia drugs Aranesp and Epogen. The Food and Drug Administration’s Oncologic Drugs Advisory Committee (ODAC) is expected to conclude a review of Aranesp’s safety and efficacy.

However, the brokerage said, the resolution of the ODAC panel next week should clarify when Aranesp sales will hit bottom, and even a worst-case scenario decision from the panel would only have a small impact on earnings per share.

More importantly, though, what makes Amgen a logical acquisition target is its most valuable pipeline asset, a compound called denosumab - currently in Phase III clinical trials - being studied for the treatment of osteoporosis, treatment-induced bone loss, bone metastases, rheumatoid arthritis and multiple myeloma.

Denosumab would be more valuable in the hands of a company with an established primary care sales force, Credit Suisse said, and as such, Amgen’s shareholders should expect management to explore all alternatives to maximize shareholder value, including an acquisition.

And in this game of fantasy acquisition - much like when an otherwise strong football team looks to sign on a superstar quarterback - Credit Suisse’s suggestion would be for Pfizer Inc. to acquire Amgen. Considering Pfizer’s “vulnerable” position of declining revenue and cash flow after 2010 and the looming patent expiration of blockbuster cholesterol drug Lipitor, a potential acquisition could improve Pfizer’s position.

“We believe a potential acquirer, who could assign a higher value to denosumab and find cost synergies, may be the best option to create value for shareholders,” Credit Suisse said.

Drug maker AstraZeneca is facing heartburn so severe not even its “healing purple pill,” Nexium, could cure it.

Generic drug manufacturing giant Teva Pharmaceuticals’ December 2007 “at risk” launch of Wyeth’s heartburn treatment Protonix - a Nexium competitor - has given rise to concerns that Nexium could be next on the generic hit list.

“At risk” launches happen when a generic company launches its product after the automatic 30-month stay granted at the beginning of patent litigation between two companies, but before the completion of the case and the expiration of the patent.

The danger to the generic company is that if it loses the litigation, it is then liable for triple the damages it would normally incur for patent infringement. But the obvious advantage is that if the generic company wins, its drug is on the market faster than you can say, “I shouldn’t have eaten that chili cheese dog.“

But even those losses aren’t enough to deter the generics companies, which can often offset future losses with big gains from sales early on.

Teva, in particular, has been growing bolder and utilizing this strategy more and more, often to its advantage as the big pharma companies either lose their cases or sometimes make settlement deals to stop the generic versions of their drugs from being manufactured.

Nexium’s patents don’t officially expire in the U.S. until 2018, but Indian pharmaceutical company Ranbaxy Laboratories has “first filer” status against Nexium, and its 30-month stay expires in April, according to Bernstein Research.

“This technically paves the way for Ranbaxy to enter the market first, but Ranbaxy hasn’t historically done ‘at risk’ generic launches,” the firm said in a note to clients. “Teva’s 30-month stay ends in July 2008, but we think one very real possibility is that Ranbaxy and Teva join forces and share in the April ‘08 launch.”

If generic versions of Nexium launch in April, AstraZeneca could take a hit of 10% in earnings per share in 2008, an 11% hit in 2009 and an 11% hit in 2010. Nexium sales in 2007 totaled $5.22 billion and accounted for 17% of AstraZeneca’s total sales.

Merck & Co., which receives a 27% royalty on U.S. sales of Nexium, would also see a decline in earnings per share, though not as dire as AstraZeneca’s. If the drug goes generic, Merck can expect a 5% decline in earnings in 2008, a 6% decline in 2009 and a 5% decline in 2010, according to Bernstein.

Bernstein also has more faith in Merck’s ability to bounce back from a Nexium surprise as it has “substantially higher” research and development capabilities, meaning it has a higher likelihood of being able to replace lost revenue.

The brokerage rates AstraZeneca at market perform and has an outperform rating on Merck. The danger to Nexium is also already discounted to a large degree in each of the companies’ stocks, Bernstein said.

Since more people pay attention to Warren Buffett’s investments than bet on the SuperBowl, we thought we’d bring you the latest investment news from the Oracle of Omaha:

Buffett’s investment company, Berkshire Hathaway Inc., showed an interest in pharmaceutical stocks Friday when a regulatory filing with the Securities and Exchange Commission showed the company has bought stakes in Sanofi-Aventis and GlaxoSmithKline, as well as maintaining its large stakes in Proctor & Gamble and Johnson & Johnson.

As of Dec. 31, Berkshire owned 1.51 million shares of Glaxo, valued at $76.1 million, and 3.57 million shares of Sanofi, valued at $162.5 million. The company also maintained a 105.8 million-share stake in Proctor & Gamble, and a 61.7 million-share stake in Johnson & Johnson, making the two companies some of Berkshire’s favorites.

Both Glaxo and Sanofi shares have been falling in recent days, though Glaxo’s shares ticked up Friday. As for Sanofi, analysts say the company is solid and its pipeline is starting to show through, which should make it a big earner in the next few quarters.

Fourth-quarter results were solid, said Citigroup in a note to clients. Earnings came in slightly ahead of consensus and revenue was in-line, and Sanofi has a “large and deep” pipeline with 30 filings targeted by the end of 2010. Sanofi also has no significant patent expirations in 2008.