That is the question regarding preapproval clinical trial results

1
To Disclose or What to Disclose?
That is the question regarding pre-approval
clinical trial results Raymond S. Fersko,
Esq. NYBA 11th Annual Meeting FDA and the
Investor Panel March 18, 2002 Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C.
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Pre-Approval Clinical Trial Results are Big News
What the Company says and when comes under
scrutiny
3
Pre-Approval Clinical Trial Results are Big News

• Pressure on management/directors to comment or
  disclose information on their interactions with
  the FDA
• Huge failure rate in clinical trials
  especially early phases
• Burn rates no profits investors want to
  hear about progress

4
Pre-Approval Clinical Trial Results are Big News
January Blues

• Clinical trial disappointments
• Abgenix (ABX-IL8 RA)
• Cubist (Cidecin in pneumonia)
• Dendreon (Provenge in PrCa)
• Elan (Alzheimers drug halt)
• Inspire Pharma (dry eye drug)
• Miravant (macular degenern)
• Protein Design Labs (lymphoma, myeloma data)

• FDA setbacks
• ImClone Erbitux BLA not accepted for review
• IDEC Pharma Zevalin delayed
• Corixa Bexxar advisory panel delayed

5
Pre-Approval Clinical Trial Results are Big News

• Impact of January Blues on Investor Sentiment
• Reduced optimism regarding clinical trials
• Less expectation that big pharmas will do
  lucrative deals/MA with biotechs
• Bristol-Myers 750mm write-off on IMCL
• Source March 2002 Biotechnology Equity Research
  Report of First Albany Corporation

6
Pre-Approval Clinical Trial Results are Big News

• Volatility is the problem every announcement
  triggers a sharp climb or decline in stock price,
  and not all parties (analysts/investors/public)
  understand the science or the process well enough
  to make educated decisions on the value of the
  stock
• More leeway with scientific media than with
  general media
• But the disclosure may go further
• Source JAMA 11/14/90 - FDA Commissioner David
  Kessler

7
Everyone has an Opinion
Biotech Analysts/Executives have two opinions
FDA Overly Cautious Does not give enough
guidance OR Companies (not theirs) not conducting
adequate clinical trials
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Everyone has an Opinion
Recent Quotes BIO said on 3/13/02 that the FDA
had agreed to improve communications with
companies and to allow independent consultants to
take part in its discussions with biotechnology
companies about designing clinical
trials. Source NY Times 3/14/02
9
Everyone has an Opinion
Patient Advocates The FDA has become the
shield behind which companies hide bad news
Bob Erwin, Director, Marti Nelson Cancer Research
Foundation There has to be a level of trust
you have to trust the drug you get, you have to
trust what the drug companies say about the
drugs Nancy Roach, Colon Cancer Alliance,
Kirkland, WA Big Pharma Investors would
overreact to FDA disclosures adding to the
volatility of biotechnology stocks Allan
Goldhammer, VP, PhRMA
10
Only the FDA keeps its opinion to
itself Unless you cross the line
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FDA Primer
Stages in New Biologic/Drug Development
1 to 3 years 2 to 10 Years 2
Months to
3 Years
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FDA Primer
Phases of IND Investigation

• Phase I Investigational Studies
• Designed to evaluate safety and side effects
• Phase II Investigational Studies
• Designed to evaluate efficacy and dose ranging

13

FDA Primer

• Phase III Investigational Studies
• Expanded controlled study, additional
  efficacy and safety information
• Phase IV
• Post Marketing Studies
• Clinical studies to extend claims or usage of new
  patient population or indication or to resolve
  FDA issues that would have prevented approval

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The FDA may not have an opinion

• but its concerned.
• FDA Regulations Promotion of Investigational
  Drugs
• No regulations or guidance as to materiality

15

The FDA may not have an opinionbut it has a
vague regulation
FDA Regulations (21 C.F.R. 312.7(a)) Promotion
of an investigational new drug. A sponsor or
investigator, or any person acting on behalf of a
sponsor or investigator, shall not represent in a
promotional context that an investigational new
drug is safe or effective for the purposes for
which it is under investigation or otherwise
promote the drug. This provision is not intended
to restrict the full exchange of scientific
information concerning the drug, including
dissemination of scientific findings in
scientific or lay media. Rather, its intent is to
restrict promotional claims of safety or
effectiveness of the drug for a use for which it
is under investigation and to preclude
commercialization of the drug before it is
approved for commercial distribution.
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The FDA may not have an opinionbut the
Constitution and the APA apply

• First Amendment?
• DC Circuit
• Significant scientific agreement as to health
  claims of dietary supplement marketers could be
  prior restraint on free speech, 1st Amendment
  could be violation of 5th Amendment - language
  so vague deprives marketers of liberty and
  property without due process
• APA FDA must define criteria for action
  cannot take action without explanation

17

The FDA may not have an opinionbut it does have
standards

• FDA Standards
• New drug cant be marketed without approved
  NDA or BLA establishing safety and efficacy for
  intended use
• Products are misbranded if labeling or
  advertising is false or misleading

18

The FDA may not have an opinionbut its looking
over your shoulder
Review Offices CDER - DDMAC (Division of Drug
Marketing Advertising and Communications) CBER -
APLB (Advertising and Promotional Labeling
Branch) CDRH - Promotional and Advertising
Policy Branch
19

The FDA may not have an opinionbut its
collecting information

• Sources of Information
• Drug Manufacturers
• Conferences
• Newspapers and other publications
• Internet
• Competitors

20
The FDA may not have an opinionbut it likes to
give hints
FDAs Informal Tools put you on notice in a
subtle way

• Guidance Documents
• Various kinds of letters to industry
• Instructions to field force
• Speeches

21

The FDA may not have an opinionbut it knows a
violation when it sees it
Enforcement Tools

• Untitled letters
• Warning letters
• Injunction
• Seizure
• Criminal Prosecution

22

The FDA may not have an opinionbut it keeps
track of what is wrong

• Most Common Violations
• Fair balance (42)
• Unsubstantiated safety and efficacy claims
  (40)
• Unsubstantiated superiority claims (17)
• Promotion of unapproved uses (16)
• Failure to file (15)
• Source FDA website

23

Fairy Tales can come true, It could happen to
you
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It could happen to you
ICN Pharmaceuticals agreed in December 2001 to
plead guilty to securities fraud failed to
disclose that its Ribavarin (Hepatitis C) was not
FDA approved misled investors ICN continued to
make public statements for two months about the
status of the application after it received two
letters from the FDA
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It could happen to you

• Per the plea agreement, ICN must
• hire an outside expert to insure there are no
  future violations of federal securities laws
• submit public communications for FDA clearance
• annual compliance certifications
• 5.6 million fine
• ICN executives arraigned in December potential
  for management/board to be held liable in these
  situations

26

It could happen to you
DDMAC issues FDA Warning Letters to companies not
in compliance with FDA regulations. AstraZeneca
was warned on basis of abstracts, posters and
materials disseminated at trade shows Promotion
of Investigational Drugs The AstraZeneca booth
in the commercial exhibit hall of the May 2001
ASCO Annual Meeting includes convention panels
describing the safety or effectiveness
ofinvestigational drugs. Moreover, AstraZeneca
disseminated promotional materialsthroughout the
commercial exhibit areaincluding materials that
made conclusions about the safety or efficacy of
this investigational drug.
27

It could happen to you
Lilly Icos LLC As a part of its routine
monitoring program, DDMAC has become aware of
websites for IC351 that are false or misleading,
in violation of the Federal Food, Drug and
Cosmetic Act and its implementing regulations.
Specifically, Lilly ICOS is promoting its
investigational new drug, IC351, as being safe
and effective for the uses under investigation
(i.e., erectile dysfunction). Thewebsites
include claims describing the safety or
effectiveness of IC351, an investigational
treatment for erectile dysfunction.
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29

It could happen to you
PharmaMar U.S., Inc. Your brochureincludes
many abstracts that present claims and
representations concerning the safety or efficacy
of Ecteinasicidin-743For exampleyou state that
the drug received objective responses in 6/34
evaluable patients and that progression-free and
overall survival rates at 1 year were 18 and 49
for the first-line studyYou should immediately
discontinue the use of the above brochure, and
any other materials that promote the
investigational new drug as safe or effective.
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It could happen to you

• Setback in clinical trials and investors review
  your prior disclosures or non-disclosures.
• Sepracor allergy drug not approved - not enough
  evidence to rule out cardiac side effects
• ImClone systems application to sell Erbitux
  (cancer treatment) not accepted
• Corixa failed to demonstrate safety and
  clinical benefit of Bexxar new trials required

31
It could happen to you
Merck withdrew NDA for Arcoxia Market Response
Shares of Merck drop 6 Analyst speculation
(protected opinion?) May be potential risks
Merck is trying to avoid Merck worried about
meeting of an FDA advisory panel in May panel
could have reversed Mercks Arcoxia studies
Cannot remember another company that had
withdrawn an entire application for a major
product in an effort to gain a minor additional
use. It doesnt make economic sense.
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It could happen to you
Merck spokesman Not clear when to refilebut
if Merck received approval for additional
treatment it could better compete with Vioxx and
Bextra which have not been approved for so many
different uses. Source NY Times 3/16/02
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It could happen to you
Even if you make it through the approval
process Not just clinical trials that require FDA
disclosure - failure to satisfy facilities
requirements GMP deficiencies threaten the
approval of drugs manufacturing issues must be
resolved if the FDA is to approve new drugs, even
if there are no further scientific or clinical
issues remaining
34
It could happen to you

• Schering-Plough faces class action lawsuits
  alleging it minimized the extent of its
  manufacturing problems before a February 2001
  announcement that the FDA would not approve
  Clarinex until quality control problems were
  resolved at four of its U.S. plants
• Share price declined 15 following the
  announcement, wiping nearly 10 billion off its
  market capitalization

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You have to be able to say something
The FDA does not have any formal regulations
governing disclosure during the pre-approval
period - It only communicates when there is bad
news In the interest of disclosure for
shareholder and investor purposes, it is
appropriate to release information as early as
Phase I giving a general indication of what data
shows without commenting on safety or efficacy
36

You have to be able to say something

• Discretion in disclosure of Phase II and III
  data
• Companies prefer to have data published in
  peer- reviewed journal to gain credence with the
  medical community
• Investigators want to publish the data for
  their own prestige

37

You have to be able to say something

• A company may respond to bona fide unsolicited
  requests for information prior to approval
  response must satisfy requirement of fair balance
  and may not be false or misleading
• Within reasonable time (e.g., two or three
  months) before product licensure, manufacturer
  may advertise either research efforts in a
  general area (institutional ads) or impending
  availability of product, without information on
  indication or dosing (coming soon ad), but not
  both
• Source Bruce Mackler, Ph.D., J.D., Regulation
  of Advertising and Promotion of Biologics

38

What You CAN Say

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What You CAN Say

• Companies may provide a factual description of
  the process
• Phase
• Design of study (e.g. double-blind)
• Institutions and Principal Investigators
  involved

40

How to Present it
Data must be presented precisely in the manner
that is consistent with the exact objectives of
the clinical trial as specified at the inception
Misrepresentation of clinical data to be
avoided Do not present results in a manner that
argues for safety or efficacy
41

How to Present it

• Avoid using
• Inappropriate formats (i.e. showing only a
  summary graph of the data and no raw figures)
• Overly complex or confusing graphic
  representations (unconventional unlabeled axes)
• Only selected portions of the data

42

How to Present it

• Investigators and Sponsors seek to increase the
  likelihood that their trial will significantly
  affect medical practice clinical trial results
  dissemination is key.
• Methods to disseminate clinical trial results
• A plan is needed
• Possibility of editorials in major journals
• Press releases and conferences, Lecture Tour
  of Principal Investigator before medical groups,
  Publication

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Conclusion

No definitive answer Judgment Calls FDA knows
it when it sees it
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Conclusion

Err on the side of making no conclusions as to
trial results or prognosis Dont try to
summarize results in general, and particularly
avoid any claims that can be misinterpreted as to
safety and efficacy
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Ferskos Final Advice

Have Patience Dont Worry, Be Happy Tell
investors - stay in there

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For Additional Information Contact Raymond S.
Fersko rsfersko_at_mintz.com 212-692-6704
(W) 917-692-9005 (M)
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Grateful acknowledgement is given to Felicia
Ellsworth, Project Analyst, Mintz Levin, for
assistance in the research and preparation of
this presentation.