I am the King of the FDA Trade

A brief look @ how the minds @ Liquid Research find both FDA Approvals and Failures. So basically the process is we work backward working every angle on why we think a drug will not get approved or fail in the market place then once we are dead sure it could pass and work then begins the search for Approval.

Just about everyone with even a slight amount of experience in the drug development business is sensitive to the harsh realities of R&D risk. Only about one in every 10 experimental therapies to start clinical trials makes it to an eventual regulatory approval--in some disease categories the success rate is in the low single digits. Research costs have grown; timelines have stretched out.

But a regulatory approval is simply an open door to an even riskier stage: commercialization. And in recent years we've seen drug launches fall far short of the rosy expectations created by companies and the analysts who follow them. When payers balk or sales plans fizzle, some of the most promising supposed blockbusters wind up as bitter disappointments. Biotechs trying to make the transition to commercialization can end up as cautionary tales for others looking to follow the same path. Pharma, for all its deep pockets and big sales forces, often does no better. And the losers are marked down and sold off, or simply shunned by investors.

There have been some solid hits on this front. Vertex ($VRTX) quickly made Incivek a blockbuster in the hepatitis C world--even if it's now racing ahead with new products in an effort to fend off new challengers. And companies like Novartis ($NVS) and Roche ($RHHBY) have been steadily building big new drug franchises, one approval at a time.

Liquid Research thought it would be instructive to look at the worst pratfalls. Of course, every train wreck will attract its share of gawkers. The point we'd like to make here is that every example below also offers some clear pointers on how to avoid a similar snafu. Hopefully, this report will also provide a bit of context for those peak sales estimates we're treated to on an ongoing basis. Each one of the drugs you see below once inspired great dreams of big money. Each of them failed to deliver. And a number of the top blockbuster prospects now in the pipeline will wind up on future lists of drug launch disasters.

Payer risk isn't going away. If anything, it's about to become much worse. These cautionary tales will help explain why. --

K-V Pharmaceuticals - Makena

The company: K-V Pharmaceuticals

The drug: Makena

The condition: Preventing premature birth

Sales: K-V reported $5.1 million in revenue for the final quarter of 2011.

K-V Pharmaceuticals became the poster child for drug launch disasters when it rolled out its new treatment to prevent premature births last year. Interested in seeing a tested product on the market, the FDA handed out its benediction. And K-V enthusiastically began selling it for $1,500 a dose, or a whopping $30,000 for a full course.

The problem was that this therapy was already being made by a string of compounding pharmacies for a mere $10 to $20 a dose. Payers had a field day. Matt Salo, the outspoken head of the National Association of State Medicaid Directors, called it "ludicrous and offensive."

As stories about price gouging spread around the country--even as K-V lobbied to get the FDA to shut the compounders down--the FDA publicly sided in favor of the pharmacies. K-V tried to salvage its product with a price cut, down to $595. In some cases, Medicaid can get it for less than $300--20% of the original price. And a federal judge tossed K-V's lawsuit attempting to force the FDA to shut down the competition.

None of the discounting, though, could save K-V from rushing into Chapter 11 for bankruptcy court protection. Forced to miss a $45 million licensing payment owed to Hologic, the original developer sued to get Makena back, saying that K-V "mismanagement" had been to blame for the launch disaster.   

K-V, for its part, has been fighting back. Without Makena, creditors will have precious little to look forward to from the company. As it stands, there isn't much upside in any case. K-V's wounds have been largely self-inflicted, making this one of the best examples of a bad launch.

For more:

Hologic says K-V 'mismanagement' killing Makena

Loss of Makena suit against FDA compounds KV's problems

KV bargaining with states on price of Makena

KV tries to force states to pay $500 premium for Makena

Escalating problems culminate in K-V Pharmaceutical bankruptcy

Dendreon - Provenge

The company: Dendreon

The drug: Provenge

The disease: Prostate cancer

Sales: $228 million in 2011

In many respects, Provenge's biggest problem was a matter of timing. When Dendreon ($DNDN) first went to the FDA looking for an historic approval of the first treatment in the U.S. to enlist the immune system to fight off cancer, the biotech had a truly revolutionary new product on its hands. But when it was forced to go back to the drawing board and do another late-stage study to prove that it worked as billed against prostate cancer, the delay shoved back the drug's launch to 2011, when the entire market was about to shift dramatically.

Dendreon didn't help matters when it priced the complex, personalized treatment at an eye-opening $93,000. As company chief Mitch Gold would report, many cancer doctors proved very sensitive to the notion that they would be on the hook until the reimbursement came through--the so-called price density issue that Dendreon used to explain its woes.

But there was much more to the story than Dendreon's defenders were willing to admit. Several physician surveys unveiled some deep-seated skepticism among specialists that the drug's ability to extend survival times was worth the cost. Then J&J's ($JNJ) Zytiga won approval for late-stage use, setting it up for a subsequent OK for the pre-chemo crowd. And more recently Medivation's ($MDVN) Xtandi came along to add to oral alternatives many physicians and patients clearly preferred.

The scars are visible for all to see. Dendreon's been forced to cut and cut again, scaling back efforts after a bitterly disappointing launch. Gold, who had predicted $350 million to $400 million in sales in 2011, was forced out after falling far short of that pace. And Gold's replacement, John Johnson, has been under fire from angry investors as he tries to right the ship.

Big new drug launches offer precious little leeway for mistakes of any kind. Failing to meet investors' expectations, though, is perhaps the greatest sin.

For more:

Dendreon to slash 600 more jobs as Provenge sales lag

Dendreon shareholders gang up on CEO at annual meeting

Zytiga, Xtandi will help pump prostate cancer market to $9.1B

Dendreon's Provenge faces new questions

Human Genome Sciences - Benlysta

The company: Human Genome Sciences

The drug: Benlysta

The disease: Lupus

Sales: $59 million in 2011

Human Genome Sciences got into trouble with Benlysta fast. After the first three quarters of sales were tallied at the end of 2011, HGS had only $59 million to show for the first new drug to treat lupus in 56 years--a long, long way from the $2.5 billion potential it once cited. And after being lauded by a long lineup of analysts eager to see the company's first new drug launch turn into a blockbuster, CEO Tom Watkins had to get out the budget ax and start chopping very early on.

Cutting at the top line, though, couldn't disguise the deep problems HGS had on the bottom line. One of the big problems that HGS ran into was sticker shock among the physicians expected to prescribe it, with the same kind of reimbursement fears that plagued the Provenge launch.

As analysts turned from optimistic to pessimistic, the company's share price quickly slid to a bargain basement price. That in turn set up an ideal scenario for GlaxoSmithKline ($GSK), HGS' longtime development partner. After initially offering a mere $2.6 billion for the company, HGS would eventually succumb to the only bidder at the table for $3 billion.

Through the lengthy standoff between the two companies, HGS had tried to confidently assure investors that it was worth far more than that. But by that time the biotech had largely lost everyone's confidence, making its protests all too easy to ignore. A final suggestion that Celgene ($CELG) was preparing a counter offer, picked up by some members of the business news elite, was laughed off as sheer nonsense.

When a drug developer-turned-marketer loses credibility, it's almost impossible to win it back. And the cost of that loss can run into the billions. For HGS, which reportedly shrugged off a $7 billion buyout offer at one point, investors will be counting the cost for some time.

For more:

The ax drops on hundreds at Human Genome Sciences in wake of GSK buyout

Biogen Idec cashes out royalties on Benlysta

GSK's Benlysta gets another shot at U.K. market

Glaxo nabs HGS for $3B after months of wrangling

Xenoport - Horizant

The company: XenoPort

The drug: Horizant

The disease: Restless leg syndrome

Sales: $1.6 million in Q3

When GlaxoSmithKline ($GSK) signed on to partner with XenoPort ($XNPT) on its experimental therapy for restless leg syndrome, the pharma giant offered up $75 million upfront and more than a half billion dollars in milestones. But regulators held up the approval process for three years, until they were satisfied that the tumors seen in animal studies wouldn't pose a risk to humans. And last spring, when the FDA approval came through, the biotech company was happy to leave the marketing effort to GSK, which said it was gearing up 500 reps to sell the treatment.

And then it all went to hell.

XenoPort's partnership with GlaxoSmithKline on Horizant was in trouble almost from the start of the commercialization effort. A paltry $1.3 million in initial sales for the first quarter on the market triggered accusations of a breach of contract. And then GSK quickly punched back with a counterclaim.

After that, the two companies expended more effort in the legal wrangle than on marketing efforts. And just days ago they agreed to go their separate ways, with GSK signing off on a deal to buy XenoPort shares in exchange for the right to wash its hands of the relationship and the therapy. And in place of making big revenue off of sales, GSK took a $165 million write-off.

For more:

GSK, XenoPort part ways after Horizant disappointment

Will Horizant's new use soothe tempers at XenoPort, GSK?

GSK hits back at XenoPort in RLS drug dispute

XenoPort rockets up after FDA approves Horizant for RLS

Savient - Krystexxa

The company: Savient

The drug: Krystexxa

The disease: Gout

Sales: $4.5 million for Q3 2012

Nothing turned out right for Savient ($SVNT). The company had hoped that a much bigger fish would come along to acquire it after winning approval for its gout drug Krystexxa. But the buyout never materialized--and neither did sales. After launching the treatment solo, Savient garnered revenue of only $3 million and change in the first quarter of this year.

The next step may well have been written into stone--or a Harvard Business School case study. About a third of the company's employees got the ax as Savient gave up on the primary care field and zeroed in on specialists.

After the cutbacks, Savient had only 35 reps in the field. Its interim CEO, David Norton, was one of the casualties of the losing drug marketing battle. Norton had replaced John Johnson, who leaped from the frying pan into the fire at Dendreon. Then a disgruntled creditor, Tang Capital Partners, tried to force the company into receivership, saying the company had breached its fiduciary responsibilities.

In a rare bit of good news, the biotech won that round when a judge tossed the complaint.

But it hasn't been an entirely bad year for Savient. Q3 sales perked up a bit and a positive opinion from European experts raised hopes of a deal. Of course, with meager sales in the U.S., what could a European pact be worth?

For more:

Savient loses on low Krystexxa sales, adopts poison pill

Tang Capital can't shuttle Savient into receivership, judge says

Amid Krystexxa woes, Savient plots layoffs and taps new CEO

Hedge fund claims Savient's bankrupt after failed Krystexxa launch

Sanofi - Zaltrap

The company: Sanofi

The drug: Zaltrap

The disease: Colorectal cancer

Sales: 7 million euros in Q3, 2012

Sanofi ($SNY) knows all about development risk. Over the past decade, the pharma giant has had a bad run in the clinic. When Chris Viehbacher was named CEO 4 years ago, he made the company's dreadful productivity rate a key theme, insisting that the whole process had to be changed and leading the company into a new era of open R&D. And it went through a two-year dry spell on new approvals, with a series of high-profile setbacks on the oncology front.

Then came Zaltrap (aflibercept). The FDA gave the colorectal cancer drug a second-line thumb's up in August based on the improvement in median survival times for the patients who took the drug in Phase III. Like a lot of new cancer drugs, it wasn't cheap, with a price of $9,600 a month that put it in the growing group of six-figure therapies. But Zaltrap's price was quickly taken down by some very public flak from providers fed up by the paltry returns that could be expected from such a costly therapy.

A trio of docs from Memorial Sloan-Kettering put together a blistering review for The New York Times, declaring that MSK was taking the drug off the institution's formulary because less expensive alternative angiogenesis inhibitors--in particular Avastin--which are just as good were available. Sanofi initially defended the price, and then backed down, offering institutions a 50% discount off the tab.

The strategic misstep has puzzled some market observers who felt that Sanofi's best shot at developing a market was to offer a discount to Avastin. And now that payers have found that flexing their muscles can earn substantial discounts, the big question now is just how many more new offerings may be vulnerable to a public beating similar to Zaltrap's. Chances are, we won't have long to wait.

For more:

Special report: Zaltrap (aflibercept concentrate) - Top 10 Late-Stage Cancer Drugs – 2012

Sanofi scores CHMP nods for diabetes and cancer therapies

FDA approves Sanofi's Zaltrap for colorectal cancer

Sanofi colorectal cancer contender Zaltrap suffers a PhIII trial setback

Sanofi, Regeneron buoyed by Ph3 colon cancer success for aflibercept

Sanofi - Multaq

The company: Sanofi

The drug: Multaq

The disease: Heart disease

Sales: €65 million for Q3 2012

Back in 2009, when Sanofi ($SNY) listed Multaq--designed to treat an irregular heartbeat--as one of its most important late-stage therapies, analysts at Morgan Stanley felt reasonably sure that even facing likely drawbacks on the marketing front, the therapy could earn €3 billion a year. That prospective figure was way out on the high side of the range of estimates, but even Citigroup pegged it as a likely blockbuster worth $1.3 billion to $1.9 billion a year.

Then the risks posed by the drug became increasingly apparent, with regulators fretting over evidence of liver, cardiovascular and lung disease. As doubts about its use as a front-line therapy began to develop, France deemed it "inadequate" and set a low reimbursement rate. New restrictions on its use were recommended. In the U.S., for example, the FDA advised against prescribing the drug for patients with permanent atrial fibrillation. And by the end of 2011, Thomson Reuters' roundup of peak sales estimates had slid all the way down to $570 million.

By the third quarter of 2012, Multaq sales were already on their way down, losing 9.1% over the same period the year before. Now the drug has a troubled rep that will be almost impossible to shed. And that leaves the pharma giant looking to new potential blockbusters--as well as its monumentally successful Lantus franchise--to fill in the blanks.

For more:

FDA knocks Sanofi's Multaq down a peg

France stiff-arms Sanofi's Multaq after study

In wake of Pallas study, Multaq hopes fade

Somaxon - Silenor

The company: Somaxon

The drug: Silenor

The target: Insomnia

Sales: $2.1 million for Q3

By the time Somaxon ($SOMX) won FDA approval for its insomnia drug Silenor on the third try back in the spring of 2010, the lengthy, frustrating process had already bled the company of $170 million. But an approval would do nothing to help the biotech find a big partner to market the drug. Instead, it started a sales effort with a tiny marketing force, which hit the streets with a new product in an already heavily crowded field.

Somaxon had found a recipe for disaster. By late last year, the San Diego-based company was forced to ax a large portion of its headquarters staff. And Stifel Nicolaus Weisel was hired as a strategic adviser to plumb the potential for a sale for a company with only $3.7 million in third-quarter (2011) sales.

But Somaxon's fortunes continued to worsen. By the third quarter of this year, product sales had slipped to a bit more than $2 million, lunch money in the pharma business.

Somaxon has inked a couple of small development deals in South Korea and Canada. And there's an OTC version to consider when looking at its U.S. potential. But this is one company that found itself in the wrong place at the wrong time with the wrong product.

For more:

Somaxon to axe HQ staffers as adviser explores possible sale

Somaxon buoyed by FDA word on OTC Silenor

Somaxon (finally) wins FDA approval for sleep drug Silenor

AstraZeneca - Brilinta

The company: AstraZeneca

The drug: Brilinta

Sales: $24 million for Q3

Expectations for Brilinta were high as AstraZeneca ($AZN) eyed FDA approval in late 2010. The blood thinner was expected to find a big niche among patients who either weren't helped by or couldn't tolerate Plavix, the standard therapy from Bristol-Myers Squibb ($BMY) and Sanofi ($SNY). It also had some particular advantages over the older drug and its other direct competitor, Eli Lilly's ($LLY) Effient. Analysts were looking at $2.7 billion in sales by 2015.

But FDA threw a big wrench in the works. Rather than ushering Brilinta onto the market as AZ hoped, the agency asked for another round of data analysis. And the seeds of doubt were sown. By the time Brilinta finally won the FDA's blessing in July 2011, analysts were cutting their expectations left and right. Many still expected the drug to build up to blockbuster status. But it had lost more than 6 months. Its time to gain market share from Plavix was sorely limited.

What Brilinta needed was a quick, solid launch onto the market, so that it could have a strong position by the time Plavix lost patent protection in May 2012. That didn't happen. While the drug managed to generate $15 million for 2011's third quarter, sales dropped back to $5 million for the final quarter of the year--and its U.S. sales for that period were virtually nil.

The company has managed to keep Brilinta on an upward trajectory this year; sales were $9 million, $18 million and $24 million for the first, second and third quarters. But now, Brilinta is fighting ultracheap Plavix copycats. AstraZeneca does have some clinical data to support Brilinta over Plavix in some patients. It's just that the story is a lot harder to sell when you're wooing patients away from a commoditized pill rather than a similarly priced brand.

Bernstein & Co. analyst Tim Anderson has put it quite simply: Brilinta was "one of the more disappointing new drug launches in the drug industry."

AstraZeneca's new CEO, Pascal Soriot, may not go as far as that. But Soriot does admit that the company "may not have shown our best game as we launched Brilinta." Still, Soriot believes Brilinta can be redeemed, Plavix generics notwithstanding. "I still think there is time to correct course," he told Reuters.

For more:

AZ puts Brilinta up for another head-to-head fight with Plavix

AstraZeneca wins FDA approval for blockbuster hopeful Brilinta

AZ's blockbuster Brilinta runs into FDA roadblock

Rare Disease Therapeutics - Anascorp

The company: Rare Disease Therapeutics

The drug: Anascorp

The target: Scorpion bites

Sales: N/A

When Marcie Edmonds of Phoenix was stung by a scorpion, she did what many would do in her circumstances. She went to the hospital, where she was hooked up to an IV drip solution of the antivenom drug Anascorp. She got two doses and was later handed a bill for $83,046, according to the New York Daily News. Her portion after the insurer's share: $25,537, for an out-of-network charge she knew nothing about.

Technically, Anascorp isn't a disaster drug launch in the same category as the rest of our sampling. But the wildly varying charges that patients and payers face have made this one of the most bizarre marketing tales in the industry.

Anascorp was approved on the basis of a tiny study with just 15 patients. It's actually been made and used for years in Mexico, where it's marketed by Instituto Bioclon for a mere $100 a vial. Rare Disease Therapeutics reportedly sells it to Accredo Health Group, a specialty pharma, for $3,500 a dose. And hospitals are adding some jaw-dropping markups. The Republic scouted around the area and discovered one hospital chain charging $7,900 per vial, another billing it at $9,077 per vial, and a third charging a whopping $12,467. Marcie Edmonds seems to have scored the new record with $83,046.

Rare Disease's president, Milton Ellis, told a reporter for the Republic that the base price was figured after assuming that they'd sell about 400 doses every year. The study costs and FDA inspection of Mexican facilities had to be factored in. And if its revenue exceeds $50 million, there are user fees to add on. The price formula looks a lot like the one used by K-V, but so far the company has avoided the kind of backlash that tripped K-V.

For more:

Scorpion antivenom's price stings AZ patients

Tiny trial suffices for FDA approval of scorpion sting antidote

Antivenom med triggers rapid cure for scorpion bites

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