Sees Continued Upside: RBC Capital analyst Brian Abraham raised the price target on BioCryst Pharma (NASDAQ: BCRX) to $16.00
Tuesday, December 4, 2018
Novelion Up As Activist Investor Urges Seeking Strategic Alternatives
Novelion Therapeutics Inc NVLN 32.65% shares were rallying Tuesday on news of activist involvement.
What Happened
Novelion revealed through an amendment to a SEC 13-D filing that biotech-focused venture capital firm Healthcare Value Capital sent a letter to Novelion’s board urging the exploration of strategic alternatives.
The VC firm has a 9.5-percent stake in Novelion.
In the letter signed by Joseph Riccardo, managing member at Healthcare Value Capital, the firm accused Novelion of allowing costs to spiral out of control.
For the first nine months of 2018, Novelion’s SG&A and R&D expenses ate 73 percent and 35 percent of revenue, respectively, as opposed to the industry average of 20-30 percent and 10-20 percent, according to Healthcare Venture Capital.
Novelion was also blamed with for delaying efforts to normalize its unsustainable cost structure and appointing its general counsel as CEO.
“We would welcome the opportunity to meet with you and management to discuss our thoughts on an immediate program to decisively and permanently normalize costs as well as the relative merits, timing and terms for the strategic alternatives available to Novelion,” Healthcare Venture Capital’s letter said.
Why It’s Important
Apart from its core issues, Novelion’s purchase of Aegerion in November 2016 has also made matters worse, as the latter’s Juxtapid for high cholesterol in people with a rare genetic disease was marketed to those patients without the condition.
The company was forced to pay over $40 million to settle litigation brought forward by the Department of Justice and SEC.
Since merging with Aegerion, Novelion has realized more than $135 million of cumulative cash operating losses, Healthcare Value Capital said in the letter.
Medtronic units to pay $30.9M to settle False Claims Act claims
Minnesota-based medical device manufacturer ev3 Inc. has agreed to plead guilty to charges related to its neurovascular medical device, Onyx Liquid Embolic System, and pay $17.9M, the Department of Justice announced today. Covidien LP, whose parent acquired ev3, separately paid $13M to resolve False Claims Act allegations resulting from its alleged payment of kickbacks in connection with another medical device, the Solitaire mechanical thrombectomy device. Pursuant to a criminal information filed today in U.S. District Court for the District of Massachusetts, ev3 will plead guilty to a misdemeanor charge in connection with the company’s distribution of adulterated Onyx, in violation of the Food, Drug and Cosmetic Act. As part of the criminal resolution, ev3 will pay a criminal fine of $11.9M and will forfeit $6M. According to the plea agreement, Onyx was approved by the U.S. Food and Drug Administration as a liquid embolization device that is surgically injected into blood vessels to block blood flow to arteriovenous malformations in the brain. The FDA has approved Onyx only for use inside the brain. Despite the FDA’s limited approval of Onyx, from 2005 to 2009, ev3 sales representatives encouraged surgeons to use Onyx in large quantities for unproven and potentially dangerous surgical uses outside the brain. The company’s sales force continued to tout unapproved and potentially dangerous uses of Onyx even after FDA officials told ev3 executives that they had specific safety concerns regarding uses of Onyx outside the brain at a 2008 meeting. FDA officials told ev3 executives that a study would be required to gain approval for uses of Onyx outside the brain and to ensure that the benefits of the device outweighed the risks. Covidien acquired ev3 in 2010, subsequent to the course of criminal conduct covered by the plea agreement. Covidien was acquired by Medtronic in 2015. Although Medtronic played no role in the criminal conduct, the company has agreed as part of the ev3 criminal resolution to implement new compensation structures to ensure the sales force responsible for marketing Onyx is not incentivized to sell the device for unapproved uses. Medtronic has also agreed to conduct compliance monitoring related to the Onyx sales and marketing components.
RedHill’s H. pylori antibiotic flies through phase 3, on track for 2019 launch
RedHill Biopharma’s lead asset, antibiotic cocktail RHB-105, bested an amoxicillin combination in patients with H. pylori infection, topline phase 3 data show. The results set RedHill up for an FDA filing in the first half of 2019 and, assuming all goes well, a launch by the end of the year.
RHB-105 is a combination of the antibiotics rifabutin and amoxicillin, and omeprazole, a proton pump inhibitor used to treat conditions in which there is too much acid in the stomach. The ERADICATE Hp2 study is a two-arm, randomized, double-blind, active comparator-controlled, confirmatory study involving 455 patients with dyspepsia—or indigestion—who also had H. pylori infection. Patients were randomized to receive four capsules three times a day for 14 days of either RHB-105 or of the active comparator, a combination of amoxicillin and omeprazole.
RHB-105, which RedHill plans to market as Talicia, met its primary endpoint, logging an 84% reduction in H. pylori infection, compared to the 58% achieved by the comparator treatment. Current treatments are about 60% effective, according to The Toronto Consensus for the Treatment of Helicobacter pylori Infection in Adults, published in 2016. But RedHill says their efficacy will only keep declining because H. pylori is highly resistant to antibiotics.
The investigators took H. pylori cultures from patients in 20 U.S. states, finding high resistance to two antibiotics commonly used to treat this infection: 17% resistance to clarithromycin and 43% resistance to metronidazole.
“The growing resistance of H. pylori to the antibiotics commonly used in standard-of-care therapies was confirmed in this study, which demonstrated the high resistance of the Helicobacter bacteria to clarithromycin and metronidazole,” said David Graham, M.D., M.A.C.G., a professor of gastroenterology at Baylor College of Medicine and lead investigator of the ERADICATE Hp2 study. “The resulting high failure rates of standard-of-care treatments, estimated at 30-40%, are a major public concern among the medical community worldwide and underscore the urgent need for new H. pylori eradication therapies, especially those utilizing antibiotics where resistance is rare such as amoxicillin and rifabutin.”
If approved, RHB-105 will be the first internally developed drug that RedHill brings to market. The company has an antibiotic cocktail for Crohn’s disease in phase 3, as well as a handful of assets targeting other GI indications. It currently has the U.S. promotion rights to Donnatal, Concordia Pharmaceuticals’ treatment for irritable bowel syndrome and acute enterocolitis, as well as to Mytesi, Napo Pharmaceuticals’ antidiarrheal drug for HIV/AIDS patients on antiretroviral therapy. The company also markets ParaPRO’s esomeprazole strontium delayed-release capsules in certain U.S. territories.
Feds to back Merck at Supreme Court in Fosamax pre-emption case
Shortly after the U.S. Supreme Court agreed in June to hear Merck & Co.’s appeal in the years-long Fosamax liability litigation, acting Solicitor General Jefferey Wall asked for permission to present oral arguments. It would be a plus for Merck, because Wall has been a major voice on the hotly debated issue of pre-emption, which revolves around the question of whether FDA decisions protect pharma companies from state legal challenges.
On Monday, SCOTUS agreed to let the feds participate in the oral arguments.
The pre-emption question dates back to the original Fosamax case, which was filed by patients who suffered femoral fractures while taking the osteoporosis drug. Merck added language to the product’s label about the risk in 2011, but more than 500 patients claimed that their injuries occurred before then, and Merck should have warned them sooner.
Merck said it tried to update the label earlier, but failed because the FDA rejected its proposed wording. Because it was the FDA’s call, pre-emption should apply, Merck said—and Wall concurred. Now, the Supreme Court will offer 10 minutes for the U.S. to make its case.
“The government has a significant interest in the proper resolution of the case, which concerns the manner in which the scope and effect of an FDA labeling decision is determined in private tort litigation,” Wall wrote (PDF).
Fact is, SCOTUS’ ability to resolve the pre-emption question could have a ripple effect on the entire pharma industry. The issue generated heated debate a few years back, when a liability case raised questions about whether generics makers can be held responsible for patients’ injuries, given that they must use label language the FDA approved for branded versions of the drugs.
In a close 5-4 decision, the justices ruled that generics makers could not be held liable in those cases.
Initially, it looked as if Merck would prevail in its pre-emption argument, too. It won two bellwether lawsuits filed over alleged Fosamax injuries. Then, in 2014, a federal judge tossed out 5,000 lawsuits from patients who claimed their fractures were caused by Fosamax. But then, a federal appeals court revived the case by throwing out that dismissal.
Lawyers representing the patients in this case have argued that Merck’s pre-emption argument is faulty because it’s largely based on an internal memo recounting a phone conversation one of its employees had with the FDA.
“Respondents are aware of no other pre-emption case in which the manufacturer relied on hearsay accounts of informal FDA communications,” the lawyers said in a recent brief.
Both Merck and the Solicitor General contend that if the FDA believed there was scientific reason to support a labeling change, the agency would have added the warning, because federal laws require it to do so.
As SCOTUS gets set to hear the case, more than a half-dozen individuals and organizations have filed briefs urging the justices to uphold the lower court ruling that would allow those thousands of Fosamax suits to go forward. Consumer watchdog Public Citizen, for example, filed a brief earlier this month suggesting that Merck’s pre-emption argument is invalid because federal statutes do not support the idea that “the FDA’s rejection of a particular proposed warning constitutes a determination ‘that no new labeling language is warranted.’”
Besides, Public Citizen argued (PDF), SCOTUS should preserve patients’ rights to pursue drug liability claims in state courts, and by siding with Merck, the judges might make it much harder for those suits to be filed.
“Allowing patients to pursue tort claims against pharmaceutical manufacturers for injuries caused by inadequate warnings is important as both an incentive for manufacturers to be vigilant about product safety and a means to provide remedies to patients,” Public Citizen wrote. “For this reason, the case has important implications that go well beyond the interests of the parties.”
FDA breakthrough designation for Bayer and Merck & Co’s AI software
Bayer and Merck & Co have won a breakthrough device designation from the US regulator FDA for artificial intelligence software they are jointly developing.
The CTEPH Pattern Recognition Artificial Intelligence Software aims to support clinical decision-making of chronic thromboembolic pulmonary hypertension (CTEPH).
The rare form of pulmonary hypertension is thought to affect around five people per million, per year around the world and the similarity of its symptoms to conditions like asthma and COPD can hinder diagnosis.
Bayer and Merck & Co’s software looks to support radiologists, who are often on the frontline for identifying CTEPH patients, by analysing image findings from cardiac, lung perfusion and pulmonary vessels in combination with a patient’s clinical history.
The pharmaceutical companies said their software could ultimately be deployed via Bayer’s Radimetrics informatics technology platform, which connects contrast medium, injector and scan information.
Prof Dr Olaf Weber, head of radiology research and development of Bayer AG’s Pharmaceuticals Division, said: “Bayer is looking forward to leveraging our expertise in radiology to develop a software to support radiologists and treating physicians in the complex diagnostic decision-making process of this rare disease.
“We hope that greater awareness of CTEPH in conjunction with a decision-support tool will eventually assist in diagnosing patients earlier and more reliably, thereby allowing earlier treatment.”
The new FDA Breakthrough Device Program was created as part of the 21st Century Cures Act and is expected to expedite the software’s assessment and review.
However, Bayer and Merck noted that development of their CTEPH Pattern Recognition Artificial Intelligence Software remains complex, given the nature of the disease and technology.
For Bayer it could be the next step in the German pharmaceutical company’s use of AI and follows last month’s deal with Genpact to apply AI to its pharmacovigilance systems through a multi-year deal with the professional services firm.
More Competition Would Be Good for Healthcare, Says Azar
‘Medicare for All’ has a fatal flaw, according to Health and Human Services (HHS) Secretary Alex Azar: “it depends on paying providers Medicare rates.”
Azar, speaking at an event here sponsored by the American Enterprise Institute, was asked his opinion about allowing non-disabled people ages <65 the ability to ‘buy into’ Medicare in order to give them another option for health insurance. “The challenge of the Medicare buy-in is that it is effectively one of the many iterations of ‘Medicare for All’ — it hinges on the notion of paying all providers what Medicare pays doctors and hospitals,” he said.
“Medicare underpays providers right now compared to the competitive market. If you allow this buy-in, or ‘Medicare for All,’ with access to lower Medicare rates, you will crowd out and cause the complete and utter destruction of the employer-sponsored health insurance system in the United States… There is simply no way private-sector insurance could compete against that, and it would be completely destructive to hospitals and doctors.”
Under such a system, “better hospitals and doctors opt-out, and they say, ‘I’m not part of that system; I won’t take it,’ and seniors will suffer because seniors don’t have access,” he added. “It seems [superficially] appealing until you get to the mechanics of why does one want to do it, and it brings the whole system crashing down.”
In a speech given at the event, Azar mainly focused his remarks on the administration’s report, issued Monday, on how to use competition to drive down healthcare costs. “Healthcare reform should rely, to the extent possible, on competition within the private sector,” he said. However, “even as we pride ourselves on having a more private-sector driven system than other nations, America’s government healthcare spending, per capita, is still higher than almost any other government on earth.”
Health and Human Services Secretary Alex Azar (Photo courtesy American Enterprise Institute livestream)
“This is partly because patients have been removed from decision-making, insulated by third-party payment systems from any incentives that could drive down the cost of care,” he continued. “These third-party payment systems, especially government programs, pay for procedures, rather than seek out value. This has led us to the system we have today, where each year we spend a staggering $28,000 per family on healthcare — and yet, many Americans still don’t have access to the care they need.”
The Affordable Care Act (ACA) didn’t really address those problems, Azar said. “Addressing this situation will involve substantial reforms to insurance regulations” — for example, a proposal HHS outlined last week that would allow patients to use money in a new type of tax-free account to pay for healthcare premiums and other out-of-pocket costs. “This is how you get beyond the traditional model of insurance and bring real competition to healthcare: by protecting Americans from the risk of catastrophic healthcare costs without insulating them from being price-conscious consumers.” The proposal has drawn criticism from advocacy groups who note that the money could be used to pay for short-term, limited-duration plans, that may not cover pre-existing conditions.
Azar’s appearance was preceded by a panel discussion on ways to increase competition in various healthcare markets. One key element for telemedicine is restrictive site-of-service rules, said Lewis Levy, MD, chief medical officer at Teladoc, a telemedicine company based in Purchase, New York. Levy noted that when former Veterans Affairs Secretary David Shulkin, MD, was visiting with President Trump in the White House, Shulkin explained that the Justice Department was blocking VA doctors from doing telemedicine visits with patients who were in their own homes; instead, they had to drive to the nearest VA facility — which could be an hour or two away — and do the virtual visit from there.
“[President Trump] was able to call up the Justice Department and get that turned around,” said Levy. “I really believe virtual care services should not be hindered by those types of rules.” He also spoke out against state licensure restrictions on physicians in one state wishing to provide telemedicine services in another state. “Does it really make sense to put doctors through that whole administrative burden of multistate licensure because they want to help people out virtually? I would submit it would be time to think about that.”
“Patients also need to be able to access their health information easily,” said Tony Miller, co-founder of Bind, a health insurance company in Minneapolis. “We shouldn’t tolerate this any more at the consumer level, this idea that someone gets to keep your data. HIPAA [the Health Insurance Portability and Accountability Act] is the problem, by the way. [But] there is a Trump card in HIPAA; it’s called the consumer — they can say ‘I want my stuff.’ Anything we can do regulatorily there would be really helpful.”
Tom Moriarty, executive vice president and general counsel of CVS, a pharmacy chain and pharmacy benefit management company headquartered in Woonsocket, Rhode Island, said his company’s problem is “the patchwork of regulation at the state level,” especially where scope of practice is concerned. “There are professionals who can do a lot more than they’re currently allowed to do — pharmacists, nurse practitioners, and others. So, getting them to practice at the top of their license is hugely important in solving this current [provider shortage], but as it is, we have to go state by state to make that happen. The more we can get to standardization around this, I think the more we can accelerate healthcare more broadly.”
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