Endo a lot more than just Percocet

July 20, 2010 – 5:20 pm by Chris

Executives at Chadds Ford, Pa.-based Endo Pharmaceuticals have had a busy few weeks. CEO Dave Holveck and Dr. Ivan Gergel, executive VP, research and development, were among the Endo executives who got to ring the opening bell of the Nasdaq on Monday to mark the company’s 10th anniversary trading on that exchange (in the photo, from left, are Alan G. Levin, executive VP, chief financial officer; Nasdaq Managing Director Steven Brundett; Colleen Craven, Endo’s VP, corporate compliance; Blaine Davis, VP, corporate affairs; Caroline B. Manogue, executive VP, chief legal officer and secretary; Mr. Holveck; Nasdaq’s Bruce E. Aust; Robert Cobuzzi Jr., Ph.D., Endo’s senior VP, corporate development; and Dr. Gergel).

And last week, Endo closed on the acquisition of HealthTronics Inc., a U.S. provider of urologic products and services.

I caught up with Dr. Gergel to ask him a few questions about the new direction Endo is taking in its research and development. Although the company is well-established in the area of pain (being the marketer of Percocet and Voltaren Gel), Endo has established significant positions in the therapeutic areas of endocrinology, oncology, and urology. Besides the well-known pain relievers Percocet, Percodan, Opana, Lidoderm, Frova, and Voltaren Gel, the company also markets the endocrinology drugs Supprelin LA and Delatestryl; the oncology drugs Valstar and Vantas; and an array of generics.

Q.: What has today’s Nasdaq opening meant for you, personally, as far the way you’re looking at the company and how it’s developing?

Ivan Gergel: Obviously it was a very significant day, and very exciting for all of us. I joined just about the same time that Dave Holveck, our CEO, joined, and certainly some discussions that he and I had when I was coming aboard was obviously the way we wanted to change the company, how we wanted it to evolve. And I think we’ve made some very significant strides in that direction over the last two-plus years. But clearly Endo has been a very successful company for a long time now, and it initially evolved as a typical specialty pharma company … that model was very good, over the last 10 years or so, but with the changing healthcare environment, we realized we had to change the direction of the company. We’ve made some significant strides in that direction over the past two years. Clearly, we’ve evolved from being just a pain-focused company and we’re now focused not just in pain.

With the acquisition of Indevus a year and a half ago, we moved our focus away from just pain, to pain, endocrinology, urology, and oncology. And then now, with the acquisition of HealthTronics, we’ve evolved to be not just a drug company, but a drug and device company. We’ve spoken many times about moving from being really product-focused to solution-focused. And as we move from product-focused to solution-focused, we’re really thinking more about partnering with healthcare providers, physicians, patients, payors, and to bring them an array of solutions, if you like, to their patient needs. That could be drugs, could be devices, could be diagnostics, and could even be services. As we see the healthcare environment changing, it’s becoming much more driven by payors and patients who are much more involved in the choices, so we see the environment changing to one where the outcomes are going to be much more important, and therefore one is going to be measured on outcomes. That’s been a key component of our strategy.

If you think about the bladder area, for example, we really are aiming to provide a whole array of solutions to one of our primary partners, who will be the urologists. And that might be diagnostics, it’s treatment in the form of Valstar, a chemotherapy, and we have things in our pipeline too such as MCC, which is Phase III testing at this point. We speak very much about something called the care pathway, which means from my perspective, partnering with healthcare providers, be they the physician or the payor or even the patient, to oversee their treatment from soup to nuts.

Q. Do you think this is the way that all of the specialty pharmaceutical industry will go, the pharma industry in general?

Dr. Gergel: I think we’re in a very fortunate position, as a smallish-to-midsized company, that has been thinking about this strategy. We have a couple of things in our favor. One, we generate a lot of cash that has allowed us to invest in new ways to go forward. Secondly, we were thinking about this perhaps a bit ahead of many of the others. Since the day I’ve started here, we’ve been talking both internally and externally about the changing healthcare environment. With the bill that was passed earlier this year, that’s certainly coming to fruition. And I think it’s positioned us well. The other thing we’ve done, clearly, is that there’s been a huge change in the sort of skillsets of the people within Endo over the past two years or so, which has positioned us to take advantage of this new healthcare direction.

Q. What changes in the skillsets are you referring to?

Dr. Gergel: Let’s talk about R&D, for example, which is probably a good place to start. We’ve evolved from being a specialty mindset to bringing on skills that allow us to execute across the whole R&D continuum from discovery all the way through to support of the commercial organization. In addition, we’ve broadened into different therapeutic areas. We now have internal expertise in the clinical and pre-clinical area in oncology, urology, endocrinology, as well as pain, where we also had a lot of experience.

In addition to that, we’ve just started to bring in our own device expertise. I’ve recently hired a very senior and seasoned R&D device expert. He has a place at the table along with the rest of the R&D team, and this is leading to some breakthrough thinking. Where really our focus was on reformulation, now it’s about innovative discovery programs. We’ve initiated eight discovery programs in the last year. We do that through collaboration with several companies in India. We’re executing on what I like to call intellectual arbitrage, because we’ve got some remarkably talented and skilled individuals running labs on India now. Many of them have spent 15, 20 years working in senior positions with pharma companies both in Europe and the U.S., and now they’ve gone back to establish themselves in India. So there’s a huge opportunity.

We very much partner with these companies in India. Within Endo, for example, we only have six or seven pharmacologists and medicinal chemists, each of them very experienced, but they are now overseeing, or partnering to oversee, work in India. They’re based in Chadds Ford, our headquarters, and they’re overseeing teams of 150 people, many of them high-level PhDs or double PhDs, working in labs in India for some of the big companies there, where there is significant infrastructure. So that’s some of the ways we’ve changed R&D over the last two years.

Q. How much of your R&D do you outsource, and what role do you see CROs playing in the changing healthcare landscape?

Dr. Gergel: Our philosophy is that we’ve actually brought in functional heads across the R&D continuum. Every function with R&D, we have very talented, seasoned executives running it. Where they run it is really the question. We have responsibility for strategy, for oversight, and for design, but where we may vary is how we execute. We maintain an extremely flexible and scalable organization. And that’s going to be driven by economy. That allows us to execute by sourcing globally. Some of it we may do fully blown internally, other parts of it we will do fully externally. A good example, one of each, is regulatory affairs, from a U.S. standpoint, which is very much totally internally driven, because we believe that to be part of our competency, and we have to be very solid on our relationship with FDA. Toxicology, however, we have only two toxicologists and we will outsource all of that sort of work – but the person running it is very much a seasoned industry professional in the toxicology arena.

Q. Can you name some of the companies that you are partnering with in India?

Dr. Gergel: We partnered with Jubilant, we’ve partnered with TCG, and we’re partnering with Syngene, which is part of Biocon. In fact, that’s our first biologic program, and I believe it’s the first partnered, truly innovative biological program that’s being undertaken with an Indian partner. [Editor's note: The Syngene partnership, which was announced by Biocon in March, is for the development of anti-cancer molecules.]

Q. As the company expands, do you intend to continue to pursue longer-term strategic arrangements with CROs?

Dr. Gergel: Absolutely. On the clinical space, we’ve built a reasonably strong team internally, people who are very experienced in contracting, for example. Our goal is not necessarily to work with a Quintiles or a Parexel, but if we are going to executive in India or South America, we will go out to those countries – I’ve been out several times – and we’ll meet with some of the local CROs. We believe, from an economic standpoint, but also from an oversight standpoint, we’ll get a much greater result by teaming closely. And we’ll also have our own people going in to mirror some of the work from time to time. It’s very hands-on. There’s nothing we do that we’re not going to be significantly hands on. We use the term, no more than two degrees of separation, which means that it’s not like we’re going to work with a very senior project manager. We’ll work with one person, who will in turn be working at the site with the investigators doing the work. We want to keep very close to where the rubber meets the road, to where the actual work is being undertaken. We don’t want to lose touch with what’s going on.

Q: What other areas are of interest for the company?

Dr. Gergel: The other area I would talk to is devices. As I mentioned earlier, we recently brought device expertise into the mix, because as a company, we clearly believe there are synergies when you mix device and drugs together. We’re seeing some very interesting thinking come about as we put the seasoned device professional into a room with seasoned drug professionals. That’s not usually something that happens in our industry, the two are somewhat compartmentalized. But there really is much more that they have in common than not in common. When you think of statistics and regulatory support of commercial organizations, devices and drugs have many parallels. But what’s really is exciting, we’re seeing breakthrough thinking, when you get a device person to understand what we talk about when we talk about drugs, and vice versa, hopefully, that’s going to bear some fruit for us as we go forward.

And a lot of what we do, it’s the interplay of drugs and devices. If you take a look at our implant technology, that’s really a device platform, which has huge potential for drugs that can’t be delivered orally and you don’t want to be giving an injection to a patient once a day or once a week or once a month. These things can deliver constant levels for periods up to and potentially even exceeding a year. …The Supprelin implant technology, for example, has huge repeat usage – the growth is quite startling for that particular product. It’s clear that these prepubescent patients do not like having painful injections every month. Bringing them back to have this [drug] once a year under the right circumstances, it’s changed their lives.