Ep. 26 - Treating Trump & BMS's $13B MyoKardia buy

Transcript
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Jeff Cranmer:
Welcome to BioCentury this Week, I'm Jeff Cranmer, Executive Editor of BioCentury and I'm joined by
[00:00:10]
Simone Fishburn:
Simone Fishburn, Editor in Chief
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Steve Usdin:
Steve Usdin, Washington Editor
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Stephen Hansen:
Stephen Hansen, Associate Editor.
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Jeff Cranmer:
Well we're five days into October and President Trump is at Walter Reed receiving a cocktail of the experimental therapies that we've been following closely at BioCentury over the past few months. Biopharma CEO's face two days of blistering hearings at the House. Bristol Myers just today has announced that it is acquiring cardiovascular company MyoKardia for a cool $13.1 billion. Stephen is following that story for us, and he's also just wrapped his fourth quarter financial markets preview. So he'll bring us up to speed on what buysiders are thinking as we enter the final stretch of the year. But first let's turn Washington, Steve where do you want to start?
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Steve Usdin:
So look it's Monday, 1:35 PM Washington time who knows what's going to happen by the end of the day - things have been moving quickly. I think the best place to start for our audience is with President Trump receiving Regeneron's monoclonal antibody cocktail last week. He received it on a compassionate use basis, it's an unapproved drug. And that really raises a number of questions that have clouded compassionate use for decades in the United States.
[00:01:27] One of the questions is should be people who are powerful, wealthy, or well connected get preferential access. What happens now if a senator, or governor gets COVID should they get access to it? And why the secret service officers, or the White House staff who were infected getting access? Should they get preference over a postal worker or a grocery store employee?
[00:01:47] I think most Americans would say no. They may be okay with the president getting it. But I think that the concern is that there isn't a policy, there isn't an ethical framework for deciding who should get access to it. And the statements that Regeneron has made haven't provided much encouragement that they're thinking along those lines. This morning the company reached out to the Biden campaign and said they just wanted to make him aware that he could get compassionate use access if he should need it, and again...
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Simone Fishburn:
So Steve, a couple of questions about that. First of all is it entirely up to the company who gets compassionate use?
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Steve Usdin:
So the FDA has to approve it, but in more than 99% of cases FDA approves it or authorizes it I should say. Another concern about compassionate use is that demand for experimental drugs is based on a false notion that unapproved drugs are efficacious. Leon Schleifer, Regeneron CEO kind of fueled that this morning he was on television, he gave an interview to CNBC and he said "most people should get access to their monoclonal antibody in a clinical trial before it's approved", but then he said "there's a downside to that and the downside is there's a one in three chance that patients will get a placebo." If you really believe that's a downside, then you shouldn't be doing a clinical trial, because that suggests that you already believe that the drug is safe and effective...
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Simone Fishburn:
But wait, Steve companies always believe their drug is safe and effective.
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Steve Usdin:
You can believe in your drug, but you can't actually say that it's safe and effective, and you can't be telling patients that it's safe and effective before FDA has authorized or approved it.
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Simone Fishburn:
Steve, this may have been a case of maybe loose language by the CEO. But you alluded to something which is that -- I don't know whether you think this is going to trigger or whether it should trigger, a greater discussion, more policies, better definitions of expanded access and who should get it, or compassionate use and who should get it, and when. My question is really, is this something that should be driven by companies, or is this something that you think patient groups should be pushing for?
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Steve Usdin:
I definitely don't think that any company should have it in their hands to make what are potentially life or death decisions about access either to scarce drugs, or to unapproved drugs, and there are other models. I think one of the best ones is [what] Johnson & Johnson's Janssen unit has, where they've funded the creation of an independent advisory committee that makes decisions about expanded access -- what's called expanded access in United States other people call it compassionate use, that makes decisions about compassionate use. And they're blinded to things like the name of the person who's applying, what their job is, what their status in society is, whether they have connections to the company that manufactures the drug. I think that most people would think that's a much more equitable way to make these decisions than to have companies making the decisions.
[00:04:43] Another thing that is in my opinion essential in the process is that there should be some kind of an appeals mechanism. That if someone is denied access to an unapproved drug that they believe that they need, the rationale for that denial should be made to them and they should have some way to appeal that.
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Jeff Cranmer:
Well it's certainly a challenge, I mean we're talking about 8 billion people are potentially facing this virus. What about first-line workers, doctors, nurses? You know I agree with you on a general basis about the Janssen model I think it's excellent, but I think right now we need to have a broader set of guidelines put in place.
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Steve Usdin:
Right now what we need to have is large clinical trials. Since we really don't know whether this drug works or not what we need to have a randomized clinical trials that are large enough that we can get the answers quickly. And then if it turns out that it is safe and effective for certain populations, then we need to get it approved for those populations. What's going to happen then is that there's going to be another set of ethical quandaries because there won't be enough supply. What a Regeneron told me this morning is that they've got 50,000 treatment doses on hand and they expect within the next few months to have 300,000. 40,000 people were diagnosed yesterday with COVID-19 in the United States and many of them would be candidates for getting this monoclonal antibody if it turns out that it is safe and effective. So there's going to be another set set of issues, that is not going to be something that's going to be in the hands of Regeneron or other monoclonal antibody manufacturers. Regeneron has committed all of its supply to U.S. Government to HHS, and the Department of Defense. So it's going to be on the federal government to come up with policies for prioritizing access and for implementing them.
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Simone Fishburn:
One more question on this topic Steve, where's Operation Warp Speed (OWS) in the picture regarding these therapies. We've mostly talked about them funding vaccines, right? The President has been talking about the tremendous and miraculous work, which is not miracles, we know it's actually the industry doing it's day job. The question I have for you is, has a Regeneron got money from Operation Warp Speed (OWS), was it them calling the shots on access to these kinds of therapies?
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Steve Usdin:
Yeah, Operation Warp Speed (OWS) has been playing a role in acquiring monoclonal antibodies from placing advanced orders from Regeneron, from Lilly, and it's also playing a role in creating manufacturing capacity for them. Therapies are very much a part of Operation Warp Speed (OWS). When I spoke with Moncef Slaoui the co-leader of Operation Warp Speed (OWS) just a week ago, he predicted that there would be two therapies that Operational Warp Speed (OWS) is backing approved or authorized by the end of this year, or early next year and I'm fairly sure that he was talking about monoclonal antibodies when he said that.
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Stephen Hansen:
So if the supply for the monoclonal is so limited do you think how they prioritize it is that going to fall into similar lines as just what the first one or two vaccines might be?
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Steve Usdin:
I think that's a reasonable way to think about it. The difference of course is that one of the possible uses for antibodies is as a prophylaxis, and if you're using as a prophylaxis then you would think that the prioritization scheme would be identical to that for vaccines assuming that it works equally well in all populations. It's also being considered as a treatment for patients who have been diagnosed as COVID positve but haven't been hospitalized that was the situation with President Trump when he received it. And then there's a third group where it's being tested which is in hospitalized patients. So the prioritization schemes for patients who have received a diagnosis with COVID-19 will be different from the prioritization you would expect for prophylaxis. And again... in this third group of patients who are hospitalized with it you would expect that would also be a different prioritization scheme then it would be for the first two groups.
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Simone Fishburn:
Just want to be clear also that the President has received multiple therapies at this point, he's got dex [dexamethasone] , he's got remdesivir. If he does well, it's going to be hard to say that it was because of this therapy.
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Steve Usdin:
I think this is really problematic because if he does well then there may be assumptions that one, or more of these therapies, or that this combination that he's received which is quite unusual is highly effective. If he does poorly, again people may make assumptions about the efficacy or safety of some or all of the therapies that he's received, and none of those assumptions are warranted.
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Jeff Cranmer:
Alright so much to dig into here... I do want to change gears because this next story I think is an important story it was burried last week under talk about the Supreme Court, talk about COVID, but some of the leaders of the world's biggest biopharmas faced off against house Democrats last week and they were soundly defeated the topic was drug pricing. Steve, I know you followed both days of the hearing we had Amgen, we had I think four, or five of the biggest companies in the industry pony up their CEO's...
[00:09:50]
Steve Usdin:
It was more than four, it was Amgen, Celgene which has been acquired by Bristol Myers Squibb, Bristol Myers Squibb, Novartis, Teva, and Mallinckrodt. They were all testifying about drug prices, in particular they were testifying about drug price increases. And some of the drug price increases that they're testifying about were eye-popping. For example, Mallinckrodt markets a drug called Acthar gel which is used for constellation of very rare epileptic conditions that primarily affect young infants. That drug was actually first approved in 1952, and at the time it sold for $40. For the first 50 years of its existence it never costs more than a $100, today it costs $39,000.
[00:10:37] The other kind of price increases that were discussed at the hearings weren't as eye-popping is that but there were quite large. And what the committee tried to do was to connect the dots and say these price increases are unjustified. Then in many cases they're driven by the executive compensation formulas that the companies use. Basically that the companies give their senior management large bonuses if they hit quarterly revenue targets, and that those revenue targets in some cases could only be made by increasing the prices on older drugs.
[00:11:09] The companies try to fight back, or try to present alternative explanations. They were different for different companies. For the most part they talked about the cost of their R &D and they said that the profits that they received from price increases we're invested, either in developing the drugs that were in question for other indications or further broader portfolios.
[00:11:30] The only company that had a different explanation was Amgen. They said that the pricing increases that they've made on a Enbrel were made because PBM's demand large rebates. The leader in the class, it's a rheumatoid arthritis drug and also used for other autoimmune diseases. The leader in their therapeutic class Humira from AbbVie has been taking large double digit price increases for many years. And what Amgen contended was that they had to match those price increases so that they could match the rebates that AbbVie gave, and that if they hadn't done that then the PBMs would have dropped them from the formularies and patients wouldn't have had access to their drugs.
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Simone Fishburn:
A couple of things on that -- first of all, on that Amgen argument with PBMs -- we did have a guest commentary by Jeremy Levin last week, that was actually written before this hearing, but he did actually make the point of: that is one of the consequences of having PBMs. It focused on that. But Steve, everything else that you just talked about really didn't sound like anything new. It's as if there's no new playbook for the industry and the conversation is not going to go away next year, regardless of the administration.
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Steve Usdin:
The interesting thing about it is that there wasn't anything new and there was, because all of the price increases that the committee had uncovered were in the past and most, if not all of the companies that were testifying have made commitments to pricing policies in which they won't increase their prices beyond the rate of medical inflation going forward. So the kind of price increases that the hearings focused on are not likely to happen, if the companies adhere to the policies.
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Simone Fishburn:
Why didn't they say that? Why didn't they respond? Look, this was wrong. We did this then, but we've made this commitment.
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Steve Usdin:
That's the point that I made in one of the stores that I wrote last week, they didn't do that. I suspect they didn't do that because they're being guided by their attorneys who, are not anxious to provide material for litigation against the companies.
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Stephen Hansen:
They don't want to admit wrongdoing.
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Steve Usdin:
Exactly, it's very difficult for CEOs to get up there and say, what we did in the past was wrong and now we're doing the right thing. Because admitting that they did something in the wrong, opens them up potentially to litigation or to demands for restitution or something like that.
[00:13:46] The problem that they have is that their credibility, saying that while we're doing the right thing now, is undermined when they don't acknowledge in any way that what they've done in the past, wasn't the right thing.
[00:13:59] And by the way, it wasn't just about price increases, there are also a variety of anticompetitive behaviors that the committee discussed and this was based on internal documents, emails, and presentations the companies had made to their own internal committees.
[00:14:11] For example, there were instances where one company has internal documents that show that they declined to provide a discount to a rival company that was doing a clinical trial using their drug, because they thought that if it costs their rival more money to conduct a trial, they'd be able to conduct fewer trials of cancer drugs that was in this case. There were also instances where companies used REMS policies, that are intended to ensure that their products are used safely, as an excuse to avoid giving samples of their products to generic companies -- samples that those companies needed to develop generic rivals.
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Jeff Cranmer:
Yeah, they certainly should have come with a better game plan. Those reports had some fairly damning quotes such as the one apparently said by the former CEO of Celgene, quote "can we take the increase tonight so that it impacts sales beginning tomorrow?" unquote and he said that right ahead of, I think, what was it Steve? It was like a board meeting or something like that.
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Steve Usdin:
It was a committee that had to approve the price increases. And, you know, I think to be fair -- obviously the committee didn't set out to provide a balanced account of the activities of all of these companies, it set out to make a case. The companies came knowing the case that the committee was going to make. And my view is that they didn't do a very effective job of defending themselves or of presenting the case, which I believe that all of these companies would like to make, which is that they're motivated by trying to develop the best medicines they can, that are going to help people with serious unmet medical conditions.
[00:15:48] They simply didn't, effectively make that case in my opinion.
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Jeff Cranmer:
All right, let's switch gears here. There are other things happening. The deal makers are still making deals. This morning Bristol said it was buying MyoKardia for $13 billion. Stephen, why is this company a fit for BMS?
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Stephen Hansen:
It is an interesting deal for Bristol-Myers because they're coming upon a period where they are going to start being challenged with some of their products, starting to lose patent exclusivity. So, I think it's a good move for them to pick up a product that is a bit of a unique asset in that it's really a first in class product for a fairly decent sized population here where there isn't any other drugs approved.
[00:16:26] It's one where if you look at what they have coming, REVLIMID, which they obviously got from the Celgene acquisition a little less than two years ago, that's coming up on losing patent exclusivity within a couple of years -- and that's nearly an $11 billion product for them. So, they really need to start doing some deals to try and make up for that coming lost revenue. And then on top of that, one of their other bestselling drugs OPDIVO, that's actually starting to lose ground here to Merck's KEYTRUDA. The last couple of quarters it's actually had declining sales, quarter over quarter, so I think it's really a move they needed to make do something to try and help replace some of that revenue.
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Jeff Cranmer:
I look forward to reading that one today, Stephen. We've been keeping you busy, last week you wrapped your 4Q Financial Markets Preview story. With the few minutes that we have left Stephen, how are investors thinking about the market with the election coming up right around the corner?
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Stephen Hansen:
This one is going to be an interesting one as well, because it's one where I think increasingly, and maybe Steve can talk to this as well, but it's one where investors are increasingly handicapping it as that it likely could be a contested election. And if that were to be the case, the axiom is that markets hate uncertainty.
[00:17:33] And upside for them is that a lot of these investors have made a lot of money already this year and probably already hit their numbers. If you look at the biotech indices, most of them between the bottom of the market and mid-March, and the middle of the year, we're up more than 50%.
[00:17:48] A lot of these investors have already taken profits over the last month or so. So heading into the fourth quarter, a lot of them are willing to step back a bit and hopefully, maybe buy up some companies that are knocked back by the volatility, but it's one where I think they're going to be fairly cautious sort of, post election.
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Simone Fishburn:
Yeah, I think we've talked about this in previous weeks that, I'm hearing it internationally, people want to bank what they can before the election. There's a lot of anticipation of, chaos.
[00:18:18] And, one other thing I think actually we should really note and I'm not sure how much Wall Street is thinking about this, but in all seriousness, coming back to the beginning -- the president has COVID-19 -- he has the infection and we obviously all wish him and everybody else with the infection, a speedy recovery. But we also know that there are longterm effects of this disease and I don't know whether that might be in the back of people's minds as another source of uncertainty, if he were to get reelected.
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Jeff Cranmer:
All right, I think that's all we have time for. You can find the pieces by Steve and Stephen on our website biocentury.com. You'll be able to find Jeremy Levin's Guest Commentary there. That is in front of the paywall, and a very interesting read.
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