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Is Approval of Bristol-Myers Squibb's Yervoy Start of New Chapter at FDA?

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Trying to determine whether the FDA's Yervoy decision is a fluke or a new trend is no idle matter. If this is a new trend, the resulting investment gains could be considerable.

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Last week, I wrote in Why FDA May Not Approve Bristol-Myers Squibb's Ipilimumab how I believed the most likely outcome of Bristol-Myers Squibb's (BMY) application for ipilimumab (trade name Yervoy) would be a delay in the decision by the FDA. Instead, FDA oncology division director Richard Pazdur approved Yervoy on Friday.

But that's not all he did.

Bristol-Myers applied for approval only in patients who had failed prior treatments. This is because the Phase III trial (the so-called "020" trial) Bristol-Myers conducted as a basis for approval enrolled no treatment-naïve (as in not receiving prior chemotherapy) patients. Pazdur went beyond this request and approved Yervoy for all late-stage melanoma patients -- those who failed prior treatment and those who were treatment naïve.

Bristol-Myers approval application was a biostatistical mess. The 020 trial was set up to prove the efficacy of Yervoy in combination with a peptide immunotherapy called gp100. The trial failed to prove this. Instead, the trial seemed to show Yervoy was more effective as a monotherapy. However, there is evidence receiving gp100 immunotherapy alone was actually worse for patients than the general standard of care. Pazdur is notorious for rejecting data from other companies based on similar biostatistical anomalies, yet he looked past all this and approved Yervoy.

One can argue the need among these melanoma patients is great, so that's why Pazdur did what he did. However, Pazdur has previously ignored similar patient need for prostate, leukemia, and breast cancer patients. In fact, Pazdur has gone the other way with every similar decision in front of him since he solidified his control of oncology drug approval in 2004.

This track record since 2004 was the basis for my opinion last week. I presumed the regulatory "rules" as imagined by Pazdur and applied by him in the past would be repeated when reviewing Yervoy. The approval of Yervoy broke all of those rules, which is why I got it wrong -- or as one person kindly pointed out to me, Yervoy being approved for all melanoma just came earlier than I expected.

If you look back over what I've written here at Minyanville, and especially if you happen to be a client of my firm's biotech research, you will see I've been calling for "adult supervision" at the FDA and specifically of Pazdur for a long time. President Bush appointed the best FDA Commissioner we've had in a long time in Mark McClellan, but Dr. McClellan moved to work on Medicare and Medicaid in 2003. Over the following five years, the FDA was most often run by a veterinarian who ended up being convicted, sentenced to three years probation, and fined $90,000 for playing the stocks of the companies he regulated.

President Obama restored strong leadership at the FDA, ending five years of largely "acting" commissioners. I hoped out loud this would return some patient-centered discipline to the FDA, specifically to Pazdur and the oncology division.

Ironically, the approval of Yervoy is exactly the kind of patient-centric decision I've been yelling at Pazdur to start making. Ignoring overly conservative interpretations of biostatistics and rules -- particularly when common sense and patient need provide strong arguments for doing so -- is exactly what the FDA needs to start doing. Additionally, the fact Yervoy was approved despite being an unpredictably toxic drug arguably could indicate the FDA is now doing a better job balancing risk and reward than we've seen recently.

On the Buzz & Banter Friday, I briefly addressed this issue. I noted that if the Yervoy approval represents a new leaf at the FDA, most investors are dramatically underweight biotech.

Grab a chart of the NASDAQ Biotech Index (NBI) from mid 2002 to the end of 2004. While some of the gains off the bottom in mid-2002 were due to the overall macro market, most of what we subsequently saw in the 2002-04 period was due to health care investors seeing Dr. McClellan's FDA as more accommodating to new drug approvals. My firm's model portfolio was up 88% in 2003 and the NBI was up 45%, indicating the idea of a more reasonable FDA is of significant importance to investors.

Trying to determine, therefore, whether Friday's Yervoy decision is a fluke or a new trend is no idle matter. If this is a new trend, the resulting investment gains could be considerable.

Earlier this year, Pazdur issued to Roche-Genentech a so-called "Refuse to File" (RTF) letter. RTFs are unusual because they are the FDA's statement an application for drug approval is so off base or incomplete it isn't even worth reviewing. Roche was seeking approval of T-DM1, a targeted therapy for treatment of breast cancer patients who have a certain genetic profile (her2-neu positive) and who have failed all other targeted therapy.

Pazdur's reason for the RTF was apparently these patients had not yet failed two untargeted therapies. This created an uproar in the medical community and among some patient groups. Both believed the issue of failing all targeted versus untargeted therapies should at least be run by clinical experts on a FDA advisory panel.

I bring this up so I may wonder aloud whether the furor over Pazdur's decision on T-DM1 caused FDA leadership to take a closer look at how he operates his oncology division. If so, perhaps "adult supervision" or oversight was the cause of the unusual approval decision for Yervoy.

Conventional wisdom has it Pazdur wanted to ignore a positive advisory panel decision on AstraZeneca's (AZN) Iressa and turn the drug down (this happened back in 2002). Then commissioner Dr. McClellan overruled Pazdur and forced him to approve the drug. This decision has been argued as the beginning for why the investment community saw the FDA as being more accommodating. If 2002 history is repeating itself in 2011 and FDA management had a role in the Yervoy approval, this would be a significant development for investors.

For my part, it will take more than Yervoy to convince me Pazdur has turned over a new leaf.

For one thing, Bristol-Myers has in hand the Phase III "024" study of Yervoy I wrote about last week. While the public has seen no details of this positive study in naïve melanoma patients, the FDA certainly has. One can argue since Pazdur knows the details, the leap to approving Yervoy for naïve patients isn't that large. I'd argue it is still something of a leap, particularly since the 024 study looked at Yervoy in combination with dacarbazine and not as a monotherapy as Yervoy appears in the FDA-approved label.

FDA watchers know Pazdur hates the fact the FDA allows dacarbazine (now generic) to be marketed as a treatment for melanoma. In fact, Pazdur has called dacarbazine a "toxic placebo." His strong dislike for this current melanoma treatment perhaps motivated him to take a brief trip outside his normal rule set and approve Yervoy with a broad label and despite the biostatistical issues.

Finally, Bristol-Myers is big biotech. Pazdur is notorious for reserving his most unreasonably conservative decisions for small biotech companies. The best case of this is the small biotech who asked the FDA for a Special Protocol Assessment (SPA) for a single-arm oncology trial. Pazdur declared, after over six months of negotiation, the FDA would no longer be issuing SPAs for single-arm oncology trials.

A larger company subsequently requested a SPA for a single-arm trial. When Pazdur cited his new policy as a reason for refusing, the larger company threatened to appeal the decision to FDA management and eventually to the courts on the grounds Pazdur was overstepping his bounds. Pazdur relented and granted the SPA to the large company and has since granted SPAs for other single-arm trials.

From this and other examples, one can argue the Yervoy decision was not the beginning of a trend simply because Bristol-Myers is huge and Pazdur prefers big pharma -- or is at least scared of big pharma's lawyers. On the other hand, Bristol-Myers clearly was not expecting to receive approval for all melanoma patients on the basis of their initial application for the 020 trial. By all early accounts, the label Pazdur decided upon was a gift.

At this point, if you are confused whether I'm arguing Yervoy does represent a new leaf or does not represent a new leaf at the FDA don't feel bad. That's because I'm confused. I honestly don't know. My gut tells me this was a one-off decision, but my long-standing dislike for how Pazdur runs the oncology decision admittedly may be coloring my gut feeling.

If I see another decision out of Pazdur's division with similarities to Friday's Yervoy decision, then I'll be farther down the road to being convinced. To answer the obvious question, I don't have any particular decision on the horizon I'm looking at. It's one of those unfortunate "I'll know it when I see it" sort of things.

I do know one thing, however: The worst possible thing biotech investors can do is look at the Yervoy decision and apply it to any number of sketchy data sets pushed by penny stock biotech CEOs. I've already seen stock message board posts arguing, "Well, if the FDA approved Yervoy with all those biostatistical issues then [insert penny stock here] should also be approved despite its biostatistical issues." Undoubtedly, we'll see more of that argument over the next few months. I'd be very surprised, in fact, to see the next couple of weeks pass without management of one of these penny stocks referencing the Yervoy decision as support for a sketchy regulatory strategy.

Readers need to be really careful not to fall for this argument without tangible confirmation adult supervision has come to the FDA.

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