While intellectual property (IP) protections and the Chinese government’s willingness to pay for expensive new products represent two large and lingering question marks, Joe Panetta, president and CEO at BIOCOM, said his last trip to China was surprising.

“We visited one of the largest pharmaceutical companies in China – Yangtze River Pharmaceuticals – which is pretty strongly government-backed and which has been long known to be a generics and traditional Chinese medicine company,” said Panetta, noting a statue of Mao Zedong in the company’s courtyard. “When I got there, not only did I see their long-established generics manufacturing facilities, but I also saw their 14- and 10-story innovative research towers that are under construction. They assured me that the future for them is not in generics, and the CEO said clearly to us: ‘I want to meet companies in San Diego, and I want to access new therapies that we can commercialize here.’”

Panetta said a portion of China’s population – by some estimates a portion as large as the total US population, according to Panetta – is becoming increasingly affluent, and has the “desire to access new therapies as well as the means to access new therapies.”

Despite a rising tide of affluence in major cities, many people living in China’s outer provinces are still in need of basic medical services, a problem China’s ambitious, $125 billion health reform initiative hopes to alleviate. “First they have to build delivery centers, and [the Chinese government] is talking about building hundreds of hospitals and thousands of clinics throughout the provinces in China, and they have to first deliver basic therapies and diagnostics and devices, but the question is how soon will it be before the government begins to take an interest in more innovative technologies,” said Panetta. “They have a long way to go, but to me, what that says is that there’s a lot of opportunity for a long time in China.”

The best way to enter the Chinese market is through partnerships, said Panetta, citing talks with companies residing in “large biotech parks in Shanghai and Beijing, and the China Medical City that’s being built from the ground up in Taizhou,” as well as US and European pharmaceutical companies that have a presence in China. “The Chinese would love for our companies to go over there and set up shop,” said Panetta. “What they tell us is that they want to learn how to innovate…I think the payback for our companies is clearly the 1.3 billion person market in China.”

BIOCOM hopes to facilitate partnerships with Chinese companies through conferences and trips to China, in order to “understand who we can build relationships with, what those relationships need to look like, and where we can build those relationships,” said Panetta. “[US] companies need to be careful about how much of their intellectual property they take to China when they create partnerships, and how much they keep [in the US],” said Panetta, and concerns remain about the level of talent and skill that exists, beyond the research level. “Several years ago, the discussion on Asia tended to gravitate toward outsourcing, low-cost research and low-cost early stage discovery efforts,” said Panetta. “That’s changed pretty drastically. It’s a terrific opportunity four our life sciences industry in Southern California,” he said.

Gilead, the Foster City, CA, powerhouse will pay cash for the deal.

In A conference call, Gilead CEO John Martin, COO John Mulligan, and R&D wizard Norbert Bischogberger had to deal with a fair amount of skepticism from industry analysts, who poked and prodded with questions about the deal, aiming to find its vulnerable spots. And there are several.

From CV Therapeutics, Gilead gets two marketed products: Ranexa, a $100 million seller in chronic angina; and Lexiscan, a $50 million drug for mycocardial perfusion imaging—plus a pipeline including two Phase III molecules for atrial-fibrillation molecule and heart failure.

Analysts asked whether Gilead was placing too big a bet on two hopes: that Ranexa, with a new label for first line treatment, will grab a major piece of the angio market; and that the platform will indeed deliver. The biotech is also banking on its own Phase III compound, darusentan, for persistent hypertension. In addition, CV Therapeutics sales force nicely expands Gilead’s access to cardio specialists. If everything works out as planned, the innovative specialty drugmaker could find itself leading in the blockbuster-making primary-care market. That would be a truly remarkable accomplishment.

Under tough questioning, the Gilead team stuck to their guns, proclaiming complete confidence in both their planned relaunch of Ranexa and the approval of darusentan in the competitive hypertension field, where other brave new molecules have failed.

Is it all a bridge too far, analysts wondered. Based on Gilead’s track record, maybe not. Martin reminded them that “we didn’t have to do this acquisition” (unlike some pharmas, hint, hint). But rather than sit on their cash pile, Gilead chose to roll the dice in a new game. That’s biotech talking.

Update 3/16/09: Astellas announced Monday morning that it would not engage in a bidding war with Gilead and terminated its $16 per share offer.

“Astellas also intends to withdraw a related lawsuit in the Delaware Chancery Court against CV Therapeutics and its directors,” the company stated in a release. “Astellas is a disciplined acquirer and does not see value for Astellas stockholders in CV Therapeutics at the price level ofthe sale announced on March 12.”

If approved, the Quad would likely improve patient adherence to HIV treatment, which typically calls for a “cocktail” of three drugs, each with its own dosing requirements. Better adherence, in turn, decreases the risk of viral resistance and drug failure. The Quad would also likely shake up the market—not a first for the Foster City, CA, biotech, which was founded in 1987 during the darkest days of the AIDS epidemic.

After launching Viread (tenofovir) and Emtriva (emtricitabine)—two nucleoside/nucleotide reverse transcription inhibitors—Gilead pioneered fixed-dose HIV combinations in 2004 by combining the two molecules, and called it Truvada. Two years later, in a rare melding of two pharma competitors, the biotech partnered with Bristol-Myers Squibb to produce the first-ever three-drug HIV regimen in a one-a-day pill—a medical advance that was unimaginable a decade earlier. Atripla, which combines Truvada with BMS’s Sustiva (efavirenz), a non-nucleoside reverse transcriptase inhibitor, became the new gold standard for first time patients, with 2008 sales of $1.6 billion, up 74 percent from 2007. Truvada remains the market leader for the third year in a row, with sales up 33 percent to $2.1 billion.

The Quad appears to be the first-ever four-drug combo in any category. (There are three-drug fixed-doses in TB and malaria.) The product builds on the success of Truvada by adding to it Gilead’s two newest experimental drugs: elvitegravir, a second-in-class integrase inhibitor, and GS 9350, a compound with the ability to boost levels of integrase inhibitors (and probably protease inhibitors, still the most widely used class in HIV cocktails).

The simultaneous development of all three drugs may lead to interesting clinical and commercialization challenges. Elvitegravir is currently going head-to-head with Isentress, Merck’s breakthrough integrase inhibitor, in a Phase III non-inferiority trial in treatment-experienced patients. The Quad must pass the Phase II non-inferiority test against Atripla, which will position either the Truvada/boosted elvitegravir or the Truvada/Sustiva combo to lead the market in a few years. It’s worth noting that data suggest that black patients are at greater risk of Sustiva’s notorious central nervous system side-effects because they metabolize the drug more slowly. The right clinical results could give integrase inhibitors the edge over this first-line non-nucleoside, making the Quad a must-have for millions of Africans with HIV.

But at what price? That question will test Gilead’s talent at mixing—and mixing it up—with the feisty global AIDS treatment movement. Meanwhile, the biotech continues to enjoy outlandish sales growth (36 percent in 2008, to $5 billion), elevating this Bay Area dynamo to the top of the list of biotechs in this season of Big Pharma takeovers.

Click here to view a slideshow from Prix Galien 2008

The 2008 Prix Galien USA is in the books, and Pharm Exec was in attendance at New York’s Museum of Natural History to take in all the festivities. Pfizer, Merck, Alexion, Wyeth, and Celgene were all recognized for their work in advancing science in both the biotech and pharma industries. Charlie Rose played master of ceremonies to a packed house featuring a who’s who of the science elite and a handful of Nobel Laureates.

The Prix Galien USA 2008 winners are:
Best Pharmaceutical Agent (Small Molecule)

• Selzentry (Pfizer)
• Isentress (Merck)

Best Biotechnology Agent

• Soliris (Alexion Pharmaceuticals)
• INFUSE (Wyeth)

Special Therapeutic Development

• The Celgene Corporation for Revlimid

The evening ended with a moving speech by author and Nobel Prize winner Elie Wiesel and a presentation of the Pro Bono Humanum award to Population Council scientist Sheldon Segal. For more on the Prix Galien 2008, keep a look out for the October issue of Pharmaceutical Executive Magazine.

Let the emerging market come up with low-cost must-have medicines, though, and we’ll see how long the US fights to keep them out. A handful of sucessful medicines from India and China could end up doing a remarkable amount to transform the US drug industry and US drug regulation.

I finally met a pharm exec who’s pursuing that insight as a way to build his company, when Abe Abuchowski, founder and COO of Prolong Pharmaceuticals, stopped by to visit not long ago. You’ve probably heard Abe’s name already. He’s the biotech pioneer who developed the technique of attaching polyethylene glycol (PEG) to protein-based drugs. PEGylation, the subject of Abuchowski’s thesis at Rutgers back in 1971, proved to be an effective way to reduce the immunogenecity of biotech drugs and to increase the amount of time they remained in the body, and it’s gone on to become one of the field’s gold-standard technologies.

Abuchowski himself went on to found Enzon (starting with just half a dozen people in 1983), which he developed into a fuly integrated company. “We had to,” he says. “At the time you couldn’t just hire services like toxicology.” Enzon’s pegylation technology led to several important products, including Adagen (pegylated adenosine deaminase, for severe combined immune deficiency disease, just the fifth biotech product to win FDA approval), Oncospar (pegaspargase for certain cancers), and the blockbuster PegIntron (pegylated interferon A, for Hepatitis C, developed with Schering Plough and approved in 2001).

With PegIntron, Enzon was profitable, but it turned away from pegylation, leaving the field to Nektar. (The company announced earlier this week that it was considering divesting itself of its biotech business.) Abuchowski, meanwhile, had left in 1996, spending more than a decade as a stay-at-home dad and part-time consultant. He never lost the entrepreneurial urge, though, and in 2005 launched Prolong. (The name refers in part to the way that pegylation prolongs the time a protein spends in the body.)

The new company’s strategy is to develop patented, second-generation biotech products in India and China, using Prolong’s expertise in pegylation (which Abuchowski says is not part of the Indian/Chinese biotech arsenal) and to partner with companies able to manufacture at low cost.

Low-hanging fruit is the name of his game. Within the past month or so, Prolong announced a partnership with Zydus Cadila, one of India’s 30,000 biotechs, to produce a pegylated erythropoietin (an anti-anemia drug in the same class as Amgen’s Epogen and J&J’s Procri) and another deal is in the works in India for a pegylated granulocyte colony-stimulating factor (GCSF) drug, similar to Amgen’s Neupogen. When last I spoke with Abuchowski, he was just back from China, where he formed a tentative agreement with a biotech company over one, or possibly two, products.

“All the modern technology we have here they are copying,” says Abuchoswki. “All the first generation of biotech products are being made there and brought into the marketplace. The benefit is that they are starting with scientific knowledge that is mature rather than developing that knowledge from scratch. They have the benefit of waiting for 20 years, then building the most modern facilities with the cheapest labor and developing these products at the lowest cost possible. There are an unbelievable nmber of biotech companies, and being able to link up with a company like ours will allow them to differentiate themselves from the others in the ferocious competition that goes on there.”

Expect an announcement soon. In the meantime, more news from Prolong:
The company has just received a grant from the National Heart Lung and Blood Institute to supply Prolong’s developmental blood replacement product (which, not surprisingly, is based on pegylated hemoglobin) for researchers in such areas as combat surgery.

“It’s exciting to us because it changes the dynamic of the company,” says Abuchowski. “Instead of raising money to test our product, we can sell it to the research community while still working on it as a product, and make a little money on it. And researchers will find new uses for it. We hope that various branches of the military will want to buy it for their own application.”