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Michael A. Swit, Esq.Vice President

The Forgotten Keys to Bio-Pharma Transactions – Regulatory, Clinical &

Quality Challenges inDue Diligence and Contracting

CHI Bridging the Business Development/AllianceManagement Interface

November 2008Boston

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Standard Disclaimers

Views expressed here are solely my own and do not necessarily reflect those of my firm or any of our clients.

These slides support an oral briefing and may not be relied upon solely on their own to support any conclusion of law or fact.

Today’s Focus

Through the Regulatory, Preclinical, Clinical & Quality lenses, we will examine these keys to successful alliances: Due Diligence – what you need to do to make

sure you don’t have to rely on … Contract Clauses – language you need to

back up your due diligence A Couple Tales of Deals Gone Awry

Deal Drivers – drying pipelines lead to partnering in one form or another – from joint ventures to outright buys

DUE DILIGENCE –

What to Look At to Minimize FDA Regulatory, PreClinical, Clinical, and

Quality Challenges

Basics Impacting Product Selection

Regulatory environment Specific issues regarding guidance or other

precedence Regulatory history Understanding how similar products were

handled by regulatory bodies FDA Europe – may be different (e.g., medical device

regulatory hurdles generally lower)

Diligence: What’s “Due” Varies by Deal

Many types, many sizes Depth of diligence dependent on complexity of the

deal and stage of development – Key – your due diligence team must understand what

should have been done at the stage of development to which the product/company corresponds

Types of Alliances Co-promotion of a product Acquisition of a license Acquisition of all product rights Joint Venture Merger Acquisition of a business unit Complete company acquisition

Due Diligence Structure Focus on areas of greatest criticality –

each due diligence will be unique – vary per stage of development

Who will be involved -- will vary per product, but is essential to obtain 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

Preclinical Clinical Quality Internal vs. External – skin in game vs. less

bias

Key FDA Diligence Issues 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 they validated animal models?

Product approved abroad? If so, what learned from that?

Preclinical Stage How were the tox studies designed? Are they

appropriate for the intended population and dosing (e.g., chronic vs. acute)

Facility – reputable and GLP compliant? Studies – monitored?

Key FDA Diligence Issues …

IND Stage – gone from bench to bedside? Pre-IND meeting held?

Results View briefing packages, minutes, FDA

correspondence Actual filing

Review Clinical hold – verify

File being maintained properly? Compare protocols sent to investigators to those

sent FDA Did firm have and conduct robust program for

handling AE’s?

Key FDA Diligence Issues …

Pivotal Studies Stage Was there an End of Phase 2 meeting?

What was agreed? Was it followed?

Statistical power of studies -- sufficient Study design

Pressure vs. non-inferiority studies Appropriate arms and controls used?

Key FDA Diligence Issues …

Pivotal Studies Stage, con’d Did the CRO monitor studies correctly? GCP compliance IRB involvement correct Use of foreign data – acceptable, but … GMP compliance – appropriate to the clinical

phase? Scale-up validated Formulation changes documented and

validated – FDA won’t approve product if commercial scale does not relate to clinical study supply

Contract labs – did they meet GLP? Example: MDS Montreal

Key FDA Diligence Issues … NDA/BLA Stage

Pre-filing meeting held? Electronically filed

Who handled – company or contractor -- e.g., Neurocrine – severe problems in filing; had to be redone

Advisory Committee needed – all NCEs now must go to A.C.

Risk Management Does the product require a “R.E.M.S.”? Might it require a post-approval study

If so, how big? Has the firm tracked AE’s appropriately?

Financial bias – adequately addressed; rare, but is a powerful public issue today

Key FDA Diligence Issues

FDA Enforced Competitive Restrictions – aka “Exclusivity” Orphan – 7 years Waxman-Hatch

5-year -- NCE 3-year 180-day – ANDA

Marketed Products Changes handled via NDA/BLA supplements Quality – GMP – audits are the answer

Example – Ranbaxy Import Alert AE Monitoring – what did they know and when did

they know it? Example -- Vioxx

Unique FDA Diligence Challenges

Criminal investigations Fraud

Application Integrity Policy Debarment – using debarred persons Changing regulatory/legal milieu – e.g.,

BioSimilars – very difficult to predict right now

Examples of FDA Issues Impacting Deals

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, was it worth it remains to be seen)

Gliatech/Guilford – Guilford pulled out when FDA legal issues revealed

THE CONTRACT

Key Clauses – Beyond Reps & Warranties -- to Manage the Regulatory,

Preclinical, Clinical & Quality Challenges

Contract Clauses …

Buyer’s right to audit seller or contract partner (and seller’s key suppliers) without notice at any reasonable time during operations vendor to cooperate fully with audit access to records and personnel to be spelled

out Why audit?

Right is a check on partner sliding toward non-compliance

Good sense – and required by FDA regs (at least on devices)

Contract Clauses …

Advance notice of changes in seller’s processing – so … Buyer can assess what regulatory action it

must take to keep its approval/submission current

Buyer can assess if change might change nature of product e.g., carbamazepine – change in synthesis led to

different crystalline structure – met spec, but flunked dissolution – API maker did not tell company – massive recall

Contract Clauses … Seller to cooperate, at no [or $___] additional

expense, with Buyer’s needs to take action to continue to comply with FDA requirements (e.g., vendor to provide data to support filing of supplements to make changes to approved applications)

Contract Clauses …

Partner’s relations with FDA ... Provide copies of 483’s, EIRs Prompt notice to buyer of initiation of FDA

inspections Prompt transmission/notice to buyer of any FDA

regulatory correspondence or other regulatory action

Right of partner to have a representative at other partner during an FDA inspection

Contract Clauses …

Timely notice of other problems encountered by partner in its manufacturing process Example: problems in making similar

products for others – duty to notify you Timely notice of any adverse reactions or

complaints reported to vendor Caveat: define “timely”

Case study – Lilly/Icos Jt. Venture on Cialis – approval delayed about a year due to quality problems at Lilly plant

Contract Clauses …

Recalls -- duty of responsible partner to cooperate with recalls initiated by other partner (if applicable)

IDE/IND Related – if delegate to a CRO, must specify in contract what duties are delegated Problem – really doesn’t insulate sponsor

from liability on the business side

Contract Clauses … Active Pharmaceutical Ingredient (API)

Sourcing DMF Maintenance –

Notice of updates Duty to file at FDA

Specify GMP level compliance (U.S. v. EU v. WHO v. ??)

IP Compliance – that they are not violating any process patents

How DMF file will be updated and who bears the burden of cost to ensure done correctly

Contract Clauses … Pre-approval inspections

Notice to Buyer when scheduled Handling

Ownership of formulation Allocation of NDA related duties

Preparing batch records Preparing labeling

IND Formulations – type of equipment and extent of GMP controls applied (varies by phase)

Ensuring scale-up and validation done properly

Specific Problems … Two unique ones….

Back-up Manufacturing Plant When needed: whenever manufacturing is

contracted out for IND or approved Example: Lilly – 7/18/02 public announcement

on 2nd Quarter results and plant problems not being cured until 2003

What clause says: lets non-mfg. party seek a backup contractor under appropriate circumstances (e.g., Lilly had GMP problems holding up NDA approvals)

Specific Problems … Two unique ones….

Who Owns the Data? When needed: whenever studies of any sort

are farmed out Example: Client has major study done at

University; contract is ambiguous on who controls the data, although clear client can use in FDA product approval filing

What clause says: makes clear who owns both raw data and results and the right to authorize publications and references

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Call, e-mail, fax or write:

Michael A. Swit, Esq.Vice President

The Weinberg Group Inc.336 North Coast Hwy. 101

Suite CEncinitas, CA 92024

Phone 760.633.3343Fax 760.454.2979Cell 760.815.4762

michael.swit@weinberggroup.comwww.weinberggroup.com

Questions?

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About your speaker…Michael A. Swit, Esq., is a Vice President at THE WEINBERG GROUP, where he develops and ensures the execution of a broad array of regulatory and other services to drug, biologics and medical device/diagnostic clients seeking to market products in the United States. His expertise includes product development strategies, compliance and enforcement initiatives, recalls and crisis management, submissions and related traditional FDA regulatory activities, labeling and advertising, and clinical research efforts.

Mr. Swit has been addressing critical FDA legal and regulatory issues since 1984. His multi-faceted experience includes serving for three and a half years as corporate vice president, general counsel and secretary of Par Pharmaceutical, a prominent, publicly-traded, generic drug company and, thus, he brings an industry and commercial perspective to his work with FDA-regulated companies. Mr. Swit then served for over four years as CEO of FDANews.com, a premier publisher of FDA regulatory newsletters and other specialty information products for the FDA-regulated community. His private FDA regulatory law practice has included service as Special Counsel in the FDA Law Practice Group in the San Diego office of Heller Ehrman White & McAuliffe and with the Food & Drug Law practice at McKenna & Cuneo, both in the firm’s Washington office and later in San Diego. He first practiced FDA regulatory law with the D.C. office of Burditt & Radzius.

Mr. Swit has taught and written on a wide variety of subjects relating to FDA law, regulation and related commercial activities, including, since 1989, co-directing a three-day intensive course on the generic drug approval process and editing a guide to the generic drug approval process, Getting Your Generic Drug Approved. A former member of the Food & Drug Law Journal Editorial Board, he also has been a prominent speaker at numerous conferences sponsored by such organizations as RAPS, FDLI, and DIA. A magna cum laude graduate of Bowdoin College, he received his law degree from Emory University Law School and is a member of the California, D.C. and Virginia bars.

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