Haberman Associates in Nature Biotechnology article on Bristol-Myers Squibb acquisition of ZymoGenetics

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I was quoted in an article entitled “Bristol-Myers Squibb reaps biologics in ZymoGenetics windfall”, by freelance journalist Emma Dorey (Brighton, UK), in the November 2010 issue of Nature Biotechnology. The article focused on the acquisition of ZymoGenetics (Seattle, WA) by Bristol-Myers Squibb (BMS). To read the article, go to the Nature Biotechnology website.

Interestingly, I was also quoted in a Nature Biotechnology article on an earlier BMS acquisition–that of the monoclonal antibody (MAb) company Medarex–in September 2009. You can read our blog post that references that article, and which discusses the MAb sector in terms of technology strategy and innovation strategy, here.

The November 2010 Nature Biotechnology article discusses the acquisition in terms of the ZymoGenetics pipeline, the financial aspects of the deal, and the competitive landscape.

Most commentators believe that BMS’ main motivation for acquiring ZymoGenetics was to gain full ownership of ZymoGenetics’ pegylated interferon-lambda (Peg-IFN-λ) program for treatment of hepatitis C (HepC). The two companies had been been collaborating  to develop Peg-IFN-λ since January 2009.

HepC is a viral disease of the liver that in its chronic form can cause cirrhosis of the liver and other serious disease manifestations. The standard treatment is with a combination therapy of peginterferon-alfa-2a (Roche’s Pegasys) or peginterferon-alfa-2b (Merck’s PEG-Intron) plus ribavirin (generic). Approximately 50% of patients with chronic HepC do not respond to therapy, with patients infected with HepC virus (HCV) genotype 1 having the worst prognosis. The treatment also has significant adverse effects, ranging from flu-like symptoms to severe adverse events such as anemia, cardiovascular events and psychiatric effects such as depression and suicidal ideation. The disease therefore has a high unmet medical need.

The receptor for IFN-λ (which is designated as a type III interferon) has a more restricted cellular distribution than for type I interferons such as the interferon-alphas. The IFN-λ receptor is present on hepatocytes of the liver, so Peg-IFN-λ should be applicable to treatment of HepC. However, because of the more restricted distribution of its receptor, researchers hypothesize that Peg-IFN-λ should have fewer adverse effects than the peg-interferon-alphas.

The HepC field is very competitive. Companies with Phase III agents include Vertex, (Telaprevir, or VX-950, an oral protease Inhibitor, Phase III), and Merck (Boceprevir or SCH 5034, an oral protease inhibitor, Phase III). Vertex recently announced positive Phase III data for Telaprevir; it expects to file an IND later this year.

In addition to the collaboration with ZymoGenetics on Peg-IFN-λ, BMS had several small-molecule HepC drugs in development. None are more advanced than Phase II. Among these drugs are the protease inhibitor BMS-791325, and the RNA protease/helicase NS3 inhibitor BMS-650032. Perhaps the most interesting BMS HepC small-molecule drug is BMS-790052, an oral inhibitor of the HCV NS5A protein. NS5A has no known enzymatic function; thus BMS-790052 has a unique mechanism of action.

In in vitro studies, BMS-790052 appears to be the most potent HCV inhibitor reported so far. In published Phase I clinical results in patients with chronic HCV infection, this agent gave a 3.3-log reduction in mean viral load that was sustained over 120 hours in two patients. In the results of a Phase II clinical trial of a combination therapy of BMS-790052 with peginterferon alpha-2a and ribavirin (presented at the April 2010 meeting of the European Association for the Study of the Liver [EASL]), the three-drug combination therapy gave a significantly higher antiviral response than the standard therapy alone. The results support further development of BMS-790052 in combination with the standard therapy, and/or with other antivirals.

Other anti-HCV medications (e.g., protease and polymerase inhibitors, and the NS5A inhibitor) are intended to be administered together with the standard therapy. Peg-IFN-λ, however, is intended to replace the interferon-alpha component of the standard therapy.

The purchase of ZymoGenetics adds another promising drug to BMS’ hepatitis C portfolio, and allows it to be competitive with such rivals in the HepC market as Merck and Johnson & Johnson (Vertex’ principal partner for Telapravir).

ZymoGenetics and BMS completed and presented data from a Phase 1a study designed to evaluate the safety and tolerability of Peg-IFN-λ in healthy subjects. The data showed that Peg-IFN-λ was well-tolerated at pharmacologically active doses, supporting the decision to go forward and initiate studies in HepC patients. In November 2009, the companies presented final results from a Phase 1b study of Peg-IFN-λ as a single agent and in combination with ribavirin to assess safety and antiviral activity in patients with chronic genotype 1 HCV infection. In the study, Peg-IFN-λ demonstrated anti-viral activity at all dose levels tested in both relapsed and treatment-naïve HCV patients. A majority of patients across all treatment arms achieved a greater than 2 log reduction in HCV RNA.  Adverse effects appeared to be minor, at pharmacologically active doses below the limiting dose.

A Phase 2 study designated EMERGE is ongoing, in which Peg-IFN-λ and ribavirin are administered to treatment-naïve patients with chronic HCV infection. The EMERGE study began with a Phase 2a open-label study (which has been completed) that explored a range of doses to be tested in the second part of the study. In the second part of EMERGE, a still-ongoing Phase 2b randomized, controlled study, researchers are assessing the safety and antiviral efficacy of Peg-IFN-λ-ribovirin therapy as compared to the standard Pegasys-ribovirin therapy.

Enrollment was completed in the Phase 2b part of EMERGE on August 25, 2010. Thus the results of the Phase 2 trial will not be determined until well into 2011.

Any small-molecule HepC drugs now in the clinic that achieve FDA approval will be approved for use in combination with a Peg-IFN-alfa and ribovirin. However, according to the Nature Biotechnology article, companies are also attempting to move toward therapies that combine two small-molecule drugs and do not include a pegylated interferon. For example, Vertex and Gilead are testing combinations of protease and polymerase inhibitors in Phase 2 clinical trials. The reason for attempting to develop interferon-free HepC therapies is that pegylated interferons are expensive, require subcutaneous injection, and at least in the case of pegylated interferon-alpha products, have significant adverse effects. If these small-molecule combination therapies prove to be safe and efficacious, they could limit the commercial potential of Peg-IFN-λ. However, BMS could also develop combinations of its small-molecule drugs as an alternative. Moreover, the safety and efficacy of any combinations of small-molecule drugs for treatment of HepC remains unproven.

As also discussed in the Nature Biotechnology article, ZymoGenetics has other pipeline drugs. These especially include interleukin-21 (denenicokin) for treatment of metastatic melanoma, which now in Phase 2b development. (Natural interleukin-21 is a regulator of natural killer cells and cytotoxic T cells.) According to the Nature Biotechnology article, interleukin-21 gave impressive results in an open-label Phase 2a trial in 39 patients with stage IV melanoma. The patients had a median overall survival of 12.4 months, and the percentage of patients surviving at 12 months was 53%. Some analysts. noting that BMS purchased ZymoGenetics mainly for its Peg-IFN-λ HepC program, say that BMS is getting ZymoGenetics’ other pipeline drugs and its marketed product (Recothrom, a recombinant thrombin product, for controlling bleeding after surgery) “for free”.

As we discussed in our September 2009 blog post on the BMS acquisition of Medarex, the BMS-Medarex acquisition represents part of a larger trend, the growing emphasis on biologics in large pharmaceutical companies, which have traditionally relied on small-molecule drugs. The acquisition of ZymoGenetics is also part of BMS’ efforts to expand into biologics. Biologics are a highly successful class of drugs that have mainly been developed by biotech companies. Big Pharma companies have been working to acquire biologics (and the companies that develop them) in order to stave off the depletion of their marketed and pipeline drugs by patent expiries and by clinical failures.

Mergers and acquisitions have been the major factor in the building of biologics franchises by large pharmaceutical companies. BMS refers to its strategy for moving into biologics (and innovative small-molecule drugs) via acquisition and partnerships as its “String of Pearls”strategy.  BMS has been forming a series of acquisitions, alliances and partnerships with biopharmaceutical companies, involving both small molecules and biologics. Medarex is the largest of these “pearls”, and ZymoGenetics is the newest. According to BMS, the String of Pearls strategy has enabled BMS to expand its pipeline by nearly 40 percent. About one-third of BMS’ pipeline drugs are biologics.

Interestingly, the 2010 BMS acquisition is not the first time that a large pharmaceutical company has acquired ZymoGenetics. ZymoGenetics was founded (as Zymos) in 1981 by three University of Washington professors. In 1988, the Danish pharmaceutical company Novo Nordisk acquired the company. For the next twelve years, it functioned as the US research arm of Novo Nordisk, and helped develop several Novo products, including ZymoGenetics products mentioned in the Nature Biotechnology article that are outlicensed to Novo (e.g, the insulin product Novolin and the Factor VIIa drug NovoSeven). In late 2000, Novo Nordisk spun out the company as ZymoGenetics, which completed an initial public offering in 2002.

That brings up the issue as to what BMS should do with ZymoGenetics. BMS might, having acquired ZymoGenetics for Peg-IFN-λ and other assets such as interleukin-21, liquidate ZymoGenetics, selling the Seattle location, offering some ZymoGenetics staff jobs at other BMS locations, and laying off the rest. Or it might realize that ZymoGenetics has proven to be an important drug discovery engine, from the days in which it was a division of Novo Nordisk, and continuing on into 2010. BMS might especially want the ZymoGenetics team to keep working on its partnered programs without interruption, bringing in milestone payments and royalties. In that case, BMS might keep ZymoGenetics as an R&D-oriented division in Seattle, only eliminating redundant functions and staff, and plan to reap any new drugs that ZymoGenetics might discover and take into the clinic. The latter strategy worked for Novo Nordisk. Might it work for BMS?

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As the producers of this blog, and as consultants to the biotechnology and pharmaceutical industry, Haberman Associates would like to hear from you. If you are in a biotech or pharmaceutical company, and would like a 15-20-minute, no-obligation telephone discussion of issues raised by this or other blog articles, or of other issues that are important to  your company, please contact us. We also welcome your comments on this or any other article on this blog.

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