Michael A. Swit, Esq. Vice President

1. Michael A. Swit, Esq.Vice President

2. The Forgotten Keys to Bio-Pharma Transactions – Regulatory, Clinical & Quality Challenges inDue Diligence and Contracting CHI Bridging the Business Development/Alliance Management Interface November 2008 Boston

3. 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.

4. 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

5. DUE DILIGENCE –What to Look At to Minimize FDA Regulatory, PreClinical, Clinical, and Quality Challenges

6. 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)

7. 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

8. 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

9. 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?

10. 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?

11. 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?

12. 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

13. 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

14. 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

15. 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

16. 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

17. THE CONTRACTKey Clauses – Beyond Reps & Warranties -- to Manage the Regulatory, Preclinical, Clinical & Quality Challenges

18. 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)

19. 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

20. 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)

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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)

27. 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

28. Questions? Call, e-mail, fax or write: Michael A. Swit, Esq. Vice President The Weinberg Group Inc. 336 North Coast Hwy. 101 Suite C Encinitas, CA 92024 Phone 760.633.3343 Fax 760.454.2979 Cell 760.815.4762 michael.swit@weinberggroup.com www.weinberggroup.com

29. 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.

30. For more than twenty-five years, leading companies have depended on The Weinberg Group when their products are at risk at any stage of the product’s life cycle. Our technical, scientific and regulatory experts deliver the crucial results, using sound science, to get products to the market, extend product lifecycles, expand product lines, and defend marketed products. Washington, D.C. ♦ San Francisco ♦ Brussels ♦ Edinburgh