June 23, 2010 webinar sponsored by The Weinberg Group, with an emphasis on key issues to explore during due diligence in acquiring FDA-regulated products or companies.

1. Regulatory, Quality & Clinical Due Diligence: The
Oft-Overlooked Keys to Successful Transactions
Presented by:
Joel I. Falk, Executive Vice President
Michael A. Swit, Esq., Vice President
June 23, 2010

2. Today's Presenters
Michael A. Swit, Esq.
Vice President
Cardiff by the Sea, CA
+1 760.633.3343
michael.swit@weinberggroup.com
Mr. Swit has been addressing critical FDA legal and regulatory issues since
1984. His expertise includes product development strategies, compliance
and enforcement initiatives, recalls and crisis management, FDA regulatory
activities, labeling and advertising, and clinical research efforts. Mr. Swit
develops and ensures the execution of a broad array of regulatory and
other services to clients, both directly and through outside counsel. Mr.
Swit has taught and written on a wide variety of subjects relating to FDA
law, regulation and related commercial activities, including having served as
member of the Food & Drug Law Journal Editorial Board.
Joel Falk has 35 years of experience in the pharmaceutical industry
performing a variety of functions including: medical writing, clinical
development, design and monitoring, project management, strategic and
portfolio management, and due diligence of products and companies. He
has responsibility for the management of clinical research, data
management, pharmacovigilance and pharmaceutical product defense
issues. Mr. Falk has either led or been instrumental in more than 20 major
drug submissions in the United States and abroad in a variety of
therapeutic areas, as well as medical devices.
Joel Falk
Executive Vice President
Washington, DC
+1 202.730.4126
joel.falk@weinberggroup.com
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3.  The Demand for Transactions – What’s at Stake?
 Keys to Effective Regulatory, Clinical and Quality Due
Diligence
 Diligence By the Development Stage – What to Probe
 Q & A
What We Will Cover Today
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4. Why Transactions Are Booming
 Developing or marketing someone else’s product
can be highly profitable
 The money on both sides of the deal is meaningful
 Developing a product internally can take years
 Time and resource intensive
 Deals – can speed the process
 Others’ cast-offs can become your cash cows
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5. What’s at Stake?
 Attrition of NCEs from Phase 1 through Phase 3 is
sobering
SUCCESS RATE BY PHASE OF DEVELOPMENT
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6. What’s at Stake? …
 Lack of NCEs exacerbated by dependency on
blockbuster products to drive growth
Percent of Revenue on Large Blockbuster Drugs
* Total return to shareholder – growth in share price and dividends over five years
Source: McKinsey Quarterly: Unlocking Value in Big Pharma. 2001 Vol. 2 McKinsey analysis
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7. R&D Dollars vs. NCE Approvals
NCE Approvals and U.S. Pharmaceutical Industry Inflation-Adjusted R & D Expenditures
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8. Alternative Approaches to Fill the Pipeline
 Mergers and Acquisitions
 Keeps companies competitive
 Smoothes the erratic nature of discovery
 Difficult to grow organically
 Requires constant new mergers to meet growth
expectations
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9. Alternative Approaches to Fill the Pipeline …
 Strategic Alliances and Partnerships
 In the past 10 years, almost 2,000 alliances were created
between “Big Pharma” and biotech/specialty companies
 Co-promotion shares risk and benefit
 More than half fail
 Disputes over IP or royalties
 Culture clashes
 Arguments over decision making
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10. Alternative Approaches to Fill the Pipeline …
 In-Licensing
 Revenue from licensed products – top 20 global drug firms
 2003 -- $70 billion
 2008 -- over $100 billion in revenue from licensed products
 Top 25 drugs today – almost half discovered or developed by a
company other than the firm that launched drug
 50% of all products today in R&D are either already licensed out or
available for out licensing
 Allows companies to be selective without buying the culture and
other headaches of another company
 Competition for these products is increasing and now driving the
prices up
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11. How Do I Pick Products?
 Key – Understand the product profile
 Toxicity
 Mechanism of action
 Ease and cost of manufacture
 Market fit
 Therapeutic market size
 Niche – what is the medical/scientific distinction?
 Does anyone want it?
 Will anyone pay for it?
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12. How Do I Pick Products? …
 Regulatory environment
 Specific issues regarding guidance or other precedence
 Regulatory history of the product
 Understand how similar products were handled by
regulatory bodies
 FDA
 Europe – may be different (e.g., medical device regulatory
hurdles generally lower)
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13. One Size Does Not Fit All
 Deals – many types, many sizes
 Co-promotion of a product
 Acquisition of a license
 Acquisition of all product rights
 Joint Venture
 Alliance
 Merger
 Acquisition of a business unit
 Complete company acquisition
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14.  Less Data – evaluating someone else’s product is
performed with less information, but the expectations
are the same
 Less Time – assessing in 4 to 8 weeks what the other
firm took 4 to 8 years to develop
 Depth of diligence – varies with deal complexity
 Product
 Deal Structure
 Due diligence – both art and science
The Challenge of Due Diligence
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15. Due Diligence Structure
 Focus on areas of greatest criticality – each due
diligence will be unique
 Who will be involved will vary per product
 Essential to use qualified personnel
 Regulatory
 U.S. FDA expertise
 E.U. and other foreign agencies, as applicable
Fallacy #1 – if it’s good enough for FDA,
the rest of the world will accept it
 Scientific/Medical
 Clinical and Preclinical/nonclinical
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16. What Are We Looking for?
 Product – Regulatory Fit
 Are there issues about which I should be concerned?
 AEs
 New products in a therapeutic class – highest regulatory
scrutiny
 Changing regulatory requirements (e.g., is FDA raising the
approval criteria?)
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17. What Are We Looking For? …
 Company Fit – Manufacturing Concerns
 How will the product be supplied/manufactured?
 Can I do it?
 Does any part of manufacturing need to be outsourced?
 What are the implications?
 How much will it cost?
 What will I need to do regulatory wise to make the
product?
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18. What Are We Looking For? …
 Regulatory
 Skeletons
 Has there been a regulatory agency review anywhere (U.S.
or otherwise)?
 Is it pertinent to this product’s pathway?
 Have promises been made?
 What remains unresolved?
 Example – nonclinical/tox. studies ongoing that could impact
further development
 Is the current regulatory strategy sound or will changes
be required?
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19. Understanding FDA Benefits
 Exclusivity
 Orphan – 7 years
 Waxman-Hatch – small molecules
 5-year – NCE
 3-year
 180-day – ANDA
 Biosimilar –
 Innovator – 12 years from approval; is retroactive to
include approvals prior to new law
 First interchangeable biosimilar
 Challenges of new law may drive use of full BLA process
by “generics”
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20. How to Analyze Identified Diligence Issues
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Identified Diligence Issue
Importance of
Resolving Issue
(H/M/L )
Summary of How to Remediate Issue
Difficulty of
Remediation
(H/M/L )

21. Deals Impacted by FDA Issues
 Alza/Abbott – the buyer’s (Abbott) regulatory issues,
revealed after deal announced, cut share price, sinking
deal based substantially on stock exchange
 Guidant – while not explicitly stated, AE issues kept
J&J bid down, allowing Boston Scientific to get firm
 But, could Boston have paid even less for it had they known
more about the extent of Guidant issues?
 Gliatech/Guilford – Guilford pulled out when FDA
legal issues revealed
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22. Key Diligence Issues by Development Stage
 Early Stage – still in the lab
 Is product subject to a written regulatory strategy plan
vetted by an outside expert?
 Is the current strategy sound or will changes be required?
 What types of proof of concept/principle studies have
been done?
 Are there validated animal models?
 In vitro vs. in vivo models
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23. Preclinical Stage
 Are toxicity studies appropriate?
 Are they appropriate for the intended population?
 Is the duration suitable for the intended clinical studies?
 Are the tested species acceptable?
 Facility – reputable and GLP compliant?
 Studies – monitored?
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24. Preclinical Stage
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*
Maximum Duration of
Clinical Trial
Recommended Minimum Duration of Repeated-Dose Toxicity
Studies to Support Clinical Trials
Rodent Nonrodents
Up to 2 weeks 2 weeks 2 weeks
Between 2 weeks to 6 months Same as clinical trial Same as clinical trial
>6 months 6 months 9 months
Recommended Duration of Repeated-Dose Toxicity Studies
to Support the Conduct of Clinical Trials

25. IND/IDE Stage
 Pre-IND/IDE meeting held?
 Results
 View briefing packages, minutes, FDA correspondence
 Actual IND/IDE filing
 Review for any red flags
 Clinical hold – verify
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26. IND/IDE Stage …
 File being maintained properly?
 Appropriate amendments and other filings?
 Timely?
 Did firm have and conduct robust program for
handling AE’s?
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27. Pivotal Studies Stages
 Was there an End-of-Phase 2 meeting?
 What was agreed?
 Was it followed?
 Special Protocol Assessment (SPA)
 Negotiated?
 Terms met?
 Statistical power of studies – sufficient
 Study design
 Superiority vs. non-inferiority studies
 Appropriate arms and controls used?
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28. Pivotal Studies Stages …
 Were studies monitored correctly?
 Audits done?
 GCP compliance
 IRB involvement correct
 Use of foreign data – acceptable, but verify GCP
 GMP compliance – appropriate to the clinical phase?
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29. Pivotal Studies Stages …
 Scale-up validated?
 FDA won’t approve product if commercial scale does not
relate to clinical study supply
 Formulation changes documented and validated?
 Contract labs – did they meet GLP?
 Example: MDS Montreal – out of compliance; 100s of
studies compromised that needed audits
 Contract manufacturers – GMP compliant?
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30. Submission Stage
 NDA, BLA, PMA, 510(k), etc.
 Pre-filing meeting held?
 Electronic Filings
 Who handled – company or contractor?
 Example: Neurocrine – severe problems in e-filing; had to be
redone
 Advisory Committee needed – all NCEs now must go to
A.C.
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31. Submissions Stage …
 Risk Management
 Does the product require a “R.E.M.S.”?
 Might NDA/BLA require a post-approval study?
 If so, how big?
 Has the firm tracked AE’s appropriately?
 Financial bias –
 Adequately addressed?
 Rarely derails application, but is a powerful public issue
today
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32. Post-Approval Issues
 Changes – properly handled via NDA/BLA
supplements or PMA supplements/new 510(k)’s?
 Quality – GMP – audits are a key answer
 AE Monitoring – what did they know and when did
they know it?
 Post-Approval Commitments – e.g., additional studies
– being met?
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33. Diligence Issues – By Development Stage
Early Stage –
Still in the Lab
Preclinical Stage Pivotal Studies StageIND Stage Submissions Stage
Is product subject to a
written regulatory strategy
plan vetted by an outside
expert?
How were the tox. studies
designed?
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What types of proof of
concept/principle studies
done?
Are they appropriate for
the proper species and
dosing (e.g., chronic vs.
acute)
Facility – reputable and
GLP compliant?
Studies – monitored?
Pre-IND meeting held?
• Results
• Fate of filed protocols
Actual IND filing
File being maintained
properly?
Amendments and other
filings appropriate/timely?
Did firm have and
conduct robust program
for handling AE’s?
Was there an End-of-
Phase 2 meeting?
Statistical power of studies
- sufficient
Study Design
Did the CRO monitor
studies correctly?
GCP Compliance
IRB involvement correct
Use of foreign data
acceptable, but verify GCP
Scale-up validated
Formulation changes
documented and validated
Contract Labs – did they
meet GLP?
Contract Mfrs. – GMP
compliant?
Pre-filing meeting held?
Electronic filing – done
well?
Advisory Committee
needed
Risk Management
Financial Bias
Post-Approval Stage
Changes – handled
properly?
Quality – continuously
verified via audits?
Phase IV commitments
met?
AE/MDR handling –
robust?

34. Conclusions
 There are meaningful advantages to developing
products through acquisition or alliances
 Can be profitable in terms of time and money
 Due diligence must be focused and structured
 What’s important
 What’s wrong and how much will it take to fix it
 Vital that Regulatory, Clinical and Quality experts –
whether internal or external – be engaged from
Day 1
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35. Q & A
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Evaluations