Intarcia announces agreement with Servier to develop and commercialize ITCA 650 exenatide mini-pump ex-US – November 12, 2014

This morning, Intarcia announced the formation of an agreement giving French pharmaceutical company Servier exclusive rights to develop and market ITCA 650, its osmotic exenatide mini-pump (which delivers a steady stream of exenatide for up to one year), outside the US and Japan. Intarcia will retain full control of ITCA 650 in the US and plans to seek another partner in Japan. Under the terms of the agreement, Intarcia is eligible to receive over $1 billion in upfront and milestone payments; there is an upfront payment of $171 million, three early-stage milestones of $230 million, and $650 million in later-stage development, regulatory, and commercial sales milestones. Intarcia will also receive very attractive tiered royalties ranging from the low double digits to the mid-30s based on future sales of ITCA 650. In total, this is clearly one of the largest ex-US biotech deals in recent memory. The two companies will co-invest in a new ex-US manufacturing site and will share the costs of any future superiority trials and combination products related to ITCA 650; Servier will be solely responsible for any trials required for approval in specific countries under its jurisdiction.

Servier is a private French company with ~21,000 employees in 140 countries; it produces a broad portfolio of products in disease areas including diabetes, cardiovascular disease, and oncology. The company’s greatest mark in diabetes is its development of the sulfonylurea gliclazide, which is sold as a branded product in India and the Philippines and is available as a generic in many international markets (it is not marketed in the US). Presumably, this is associated like any SFU with weight gain and hypoglcyemia. Servier has also been the subject of controversy in the past few years following the removal of its diabetes/obesity drug Mediator (benfluorex) from European markets in 2009 amid allegations that it caused over 1,000 deaths due to heart valve damage and pulmonary hypertension. It was never established whether there was actually a causal relationship between the drug and those events.

The choice of Servier as a partner is certainly an unconventional one at first glance (initially we would’ve expected a larger company more active in diabetes), but we also point out that little that Intarcia has done to date has been traditional or typical, including the initial funding done without a Big Pharma partner ($410 million in the last two years) to cover the CVOT and phase 3 trials. Many believe that ITCA 650 will be a disruptive product that will eventually prove to be superior not only to other GLP-1 agonists but to other oral type 2 diabetes drugs as well, meaning that almost every established player in type 2 diabetes could have a potential conflict of interest with the product. We do believe that the combination of efficacy, weight loss, and virtually guaranteed adherence aspects of the drug are particularly notable and look forward to patient, payer, and HCP feedback on it.

We imagine maintaining full control over the US market also represented a top priority for Intarcia, and we suspect most of the major pharmaceutical companies would likely not have agreed to an ex-US-only partnership, particularly given the profitability that lies in the US. In a conversation today, we asked Mr. Graves if this agreement meant that Intarcia would have sufficient financial resources without needing to pursue an IPO to bring the compound to market – he said this was the case and that the company was in a very strong financial position and has plenty of access to capital now with promising phase 3 data and this partnership now in place. He was also optimistic that staying private for now could save the company a lot of distraction and enable it to remain laser focused on the execution at hand - finishing phase 3, bringing ITCA 650 to the market, and building a fully capable company in the US all at the same time. Clearly, this decision aligns well with the company’s “there is no analogue” approach to drug development and what they have done in building a disruptive company and product thus far – it remains to be seen if the right marketing, branding, distribution, etc can be developed for Intarcia by the two private companies, but clearly they are giving it a go! The company is still planning for early 2016 for the US regulatory submission of ITCA 650.

• As a reminder, ITCA 650 is a small (matchstick-size) osmotic mini-pump that is placed under the skin and releases a steady stream of exenatide for up to one year. Once the mini-pump is implanted, a small stream of body fluid diffuses into the device, pushing the exenatide suspension out in a controlled fashion, leading to continuous delivery without the peaks commonly seen with injectable drugs. Intarcia’s formulation of exenatide is also notable, enabling stability at human body temperature for up to three years. Intarcia plans to market both 40 mcg/day and 60 mcg/day doses of ITCA 650, and both six-month and one-year mini-pumps (in addition to a three-month mini-pump with a 20 mcg/day “starter” dose that will be used to begin treatment regardless of the final dose). Big picture, we believe that the main advantage for ITCA 650 over other available medications will be patient adherence and control over time, as there will be no need for patients to administer regular injections or even remember to take a daily pill – we look very forward to August when we’ll see head to head results vs. Januvia, which should reinforce the potential for ITCA 650 to be used very early stage. .
• Intarcia recently released positive topline results from the first two phase 3 trials of ITCA 650. Results from the FREEDOM-1 study demonstrated statistically superior A1c reductions (1.4%-1.7%) from a baseline of 8.4% with ITCA 650 compared to placebo in patients with type 2 diabetes on up to three oral medications. The FREEDOM-1 High Baseline (HBL) study demonstrated an average sustained A1c reduction of 3.4% with ITCA 650 in treatment refractory patients with a starting baseline A1c of 10%-12% (mean 10.8%). Two additional phase 3 trials for ITCA 650 are ongoing: FREEDOM-2 (n=500), a head-to-head study vs. Merck’s Januvia (sitagliptin) expected to complete in August 2015, and FREEDOM-CVO (n=4,000), a cardiovascular outcomes trial expected to complete in July 2018.
• Mr. Graves indicated that a US regulatory submission of ITCA 650 is likely in early 2016. Ex-US filings could occur in the same time frame in partnership with Servier.

-- by Emily Regier and Kelly Close