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2005 BioMedTracker Outlook
January 06, 2005
The second part of our outlook concentrates on three companies Amylin, Dendreon and Genaera. We feel these three companies have promising drugs in their pipelines, have upcoming catalysts to propel the stock and are currently undervalued based on their drug pipelines. We will be keeping a close eye on these companies in the coming months as catalysts approach.
PART I-DRUGS BY INDICATION
OBESITY
The anti-obesity drug market is currently $526 million in size and is estimated to be worth $2.5 billion globally by 2012. The modest efficacy and significant side effect risks of the available pharmacological therapies - led by Sibutramine (Knoll's Meridia; AstraZeneca/Eisai's Reductil) and Orlistat (Roche's Xenical) - contributes to the small percentage of drug-treated patients. Available therapies achieve only an average 5-10% loss of initial body weight in less than 50% of patients. Less than 25% of potential patients are formally diagnosed as obese, and less than 20% of those who are diagnosed are treated with pharmacological therapies.
The two-year results of the RIO-North America phase III trial indicate that Acomplia is a promising drug for the long-term management of weight and associated cardiovascular risk factors in abdominally obese patients. In this trial and in two preceding studies, Acomplia was shown to be safe, having no significant effects on EKG or heart rate. Demonstration of long-term safety is critical for the approval of new anti-obesity drugs, given the history of anti-obesity product withdrawals for safety reasons. At two-years, overall discontinuation rates for adverse events for Acomplia are favorable, relative to placebo. Based on the efficacy results, safety profile, and the size and number of well-designed clinical trials, we remain optimistic about the likelihood of approval for Acomplia for obesity. Acomplia is also indicated for smoking cessation and could curb the weight gain that is associated with stopping smoking. Sanofi-Aventis expects to file an NDA in 2005 and receive FDA approval for treatment of weight-gain by 2006.
DIABETES
Exenatide (Amylin Pharmaceuticals)
Exenatide is an injectable anti-diabetic drug for Type II diabetics, many of whom are currently taking oral anti-diabetic drugs for glucose control. Clinical trials have demonstrated Exenatide's efficacy for glucose level control and body weight reduction with minimal hypoglycemic side effects. The drug is positioned to complement and compete with market-leading oral therapeutics such as Actos (Takeda) and Avandia (GlaxoSmithKline) in the lucrative Type II diabetic market. Exenatide helped patients with glucose control in three distinct late-stage clinical trials, each of which tested Exenatide in combination with different diabetes drugs, and it also contributed to patient weight loss. Nearly all people achieving tight control with existing medication gain weight in response to the glucose being pushed into cells by the therapy.
Exenatide's advantage lies in the fact that unlike the oral anti-diabetic drugs which work by a single mechanism, it works by several mechanisms: it stimulates insulin secretion, slows emptying of the stomach and inhibits production of glucose by the liver. It also appears to suppress appetite and helps weight loss. The main drawback is that it must be injected subcutaneously twice a day at breakfast and dinner. Exenatide LAR (Long Acting Release) is being developed and may allow once-a-week to once-a-month administration.
In September 2004, the U.S. Food and Drug Administration (FDA) formally accepted the New Drug Application (NDA) requesting approval of Eli Lilly and Amylin Pharmaceuticals' Exenatide for treatment of Type II diabetes. The Prescription Drug User Fee Act (PDUFA) date is April 30, 2005.
Symlin (Amylin Pharmaceuticals)
Symlin is an injectable drug for insulin-using diabetics who are unable to achieve adequate glycemic control. For Type I diabetes patient who have been taking insulin, Symlin will be used in addition to the insulin as an adjunct therapy. The second group of patients that Symlin will target is that comprising of Type II patients who are using insulin. Among adults with diagnosed diabetes, about 12% take both insulin and oral medications, 19% take insulin only, 53% take oral medications only, and 15% do not take either insulin or oral medications. It is estimated that there are approximately 4.5 million people in the United States who use insulin each day to control their diabetes.
Symlin's advantage is in helping to control glucose levels without increasing the risk for hypoglycemia or increasing weight when added to insulin regimens. The main drawback is that patients must inject Symlin three or four times a day, in addition to any insulin injections. Consequently, it is not likely to be used by more than 10-15% of insulin-using diabetics.
In September 2004, Amylin Pharmaceuticals submitted a response to the U.S. Food and Drug Administration's (FDA) second approvable letter for Symlin. A response from the FDA is expected by March of 2005.
CARDIOVASCULAR DISEASE
In November 2004, NitroMed announced results from the African-American Heart Failure Trial (A-HeFT) during the 2004 American Heart Association's Late-Breaking Scientific Sessions. In the A-HeFT study, African-American patients with heart failure experienced significant improvement in survival after taking BiDil, the nitric-oxide enhancing, fixed-dose combination of Isosorbide dinitrate and Hydralazine, in addition to standard heart failure therapy, as compared with patients in the study receiving standard heart failure therapy plus a placebo. BiDil was specifically designed to work only on African-American patients, who generally have a death rate twice that of whites from severe heart disease. Some scientists have attributed the higher death rate from heart disease to a variety of factors in the African-American community: lower-quality medical care, high-cholesterol diets and higher poverty rates.
The 18-month randomized, double-blind, placebo-controlled study enrolled 1,050 self-identified African-American patients with New York Heart Association class III and IV heart failure at 170 clinical research sites with no patients lost to follow-up over the full 18-month period. A-HeFT patients were prescribed the fixed-dose I/H (20 mg/37.5 mg) or placebo (518 fixed-dose I/H and 532 placebo), in addition to current standard heart failure treatments. This is the largest minority and female population studied in a heart failure clinical trial to date. In July 2004, on the unanimous recommendation of the independent A-HeFT Data Safety and Monitoring Board (DSMB) and A-HeFT Steering Committee, NitroMed halted the confirmatory phase III clinical trial of the fixed-dose I/H therapy, BiDil, due to a significant survival benefit seen with the drug.
In December 2004, NitroMed completed the submission of the amendment to the New Drug Application (NDA) for BiDil with the submission of the complete A-HeFT (African-American Heart Failure Trial) study report. A response from the FDA is expected later in 2005.
INFECTIOUS DISEASE
Dalbavancin (Vicuron Pharmaceuticals)
There remains a high unmet need for agents that can treat life threatening infections caused by multi-drug resistant Gram-positive bacteria. MRSA (methicillin-resistant staphylococcus aureus) strains once confined to hospitals are now found in the wider community and some infections even shrug off Vancomycin, traditionally the antibiotic of last resort. Currently in the U.S., more than 50 percent of Staph strains causing adult infections in hospital intensive care units are resistant to methicillin treatment, and in other hospital settings more than 40 percent of Staph infections are caused by MRSA.
Dalbavancin and Oritavancin (InterMune) are next-generation glycopeptides similar to Vancomycin but showing activity against Vancomycin-resistant S. aureus and enterococci. Dalbavancin is intended for the treatment of serious systemic infections, particularly those caused by Staphylococci. Dalbavancin is more potent than Vancomycin, in particular against MRSA. It has bactericidal activity, which means that it kills the bacteria rather than merely inhibiting their growth. Dalbavancin has a half-life of about 9-12 days which allows for once-weekly administration. No significant toxicity has yet been reported.
In December 2004, Vicuron announced that it has submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) for Dalbavancin and approval is expected later in 2005.
OPHTHALMOLOGY
There is a significant unmet need for treating wet age-related macular degeneration (wet AMD), given the aging population. Macugen’s (Pegaptinib; Eyetech) approval in December 2004 for wet AMD still leaves room for the commercial success of other drugs currently in development. One key trend in the wet AMD market is its significant expansion over the next 2-3 years due to label extensions for QLT's Visudyne Photodynamic Therapy (PDT) and the introduction of anti-angiogenic drugs, such as Macugen, to treat the minimally classic and occult forms of the disease.
Of the major drugs in the wet AMD pipeline, Genaera's anti-angiogenic drug Squalamine has the greatest potential to overcome the key limitations with laser photocoagulation, Visudyne PDT, and other anti angiogenic therapies. Intravenous Squalamine delivery is less invasive than intravitreal delivery and it also avoids the complications associated with intravitreal injections. In view of Squalamine's potential breakthrough success, we consider Genaera to be currently undervalued based upon its 10-year pipeline valuation.
Genaera presented early phase II data in on the MSI-1256F-207 study of Squalamine at the October 2004 Rodman & Renshaw Techvest 6th Annual Healthcare Conference. Interim results using a 10mg dose of Squalamine showed that 83% of participants either stabilized or improved on visual acuity test scores after 3 months. Genaera anticipates reporting additional data from the first phase II trials starting early in 2005. Genaera intends to begin a phase III trial in the first half of 2005 to run concurrently with their largest phase II trial.
NEUROLOGY
The multiple sclerosis (MS) market is expanding and is expected to reach $6.85 billion in 2014. Standard therapies include the beta interferons, such as Avonex (Biogen Idec), Betaseron (Chiron), and Rebif (Serono), and the non-interferon Copaxone (Teva). Tysabri is a novel drug that inhibits inflammatory cell infiltration into sites of inflammation, a mechanism thought to drive MS.
With its novel mechanism of action and positive interim data released from the AFFIRM trial, evaluating Tysabri as a monotherapy, Tysabri was granted accelerated FDA approval amidst much interest and optimism. Data at the one-year time point, in the two-year AFFIRM trial, showed an impressive 66% reduction in relapse rate in patients given Tysabri compared to placebo control. This relapse rate is more than doubled that observed with other MS treatments. Final data is expected this year and of particular interest is whether Tysabri can modulate the expanded disability status scale (EDSS), a much more functional measure of the clinical progression of MS. An effect on EDSS will further propel Tysabri’s revenue potential, which is already projected to reach $1.7 billion in 2011.
Tysabri is also being evaluated in combination with the beta interferon Avonex. Avonex is currently the most widely prescribed MS drug. Of interest is how Antegren will affect Avonex, since Biogen fully owns Avonex, while it co-developed Antegren with Elan and will only receive 50% of the revenue accordingly. Interim data from the SENTINEL trial, which is evaluating the combination of Tysabri and Avonex against Avonex alone, was released upon FDA approval in November 2004. The combination of Tysabri and Avonex showed a 54% reduction in relapse rate over Avonex alone. While interim results so far show that the drug combination is superior to Avonex alone, the study does not have a Tysabri alone control arm, so it is difficult to determine whether the effects on relapse rate is due to Tysabri alone or because it was combined with Avonex. We are waiting for the EDSS score from both the AFFIRM and SENTINEL trial, both expected in the first half of 2005, to determine whether Tysabri is likely to be used in combination with Avonex. We suspect that the positive results seen so far with the Tysabri and Avonex combination is due to Tysabri alone with little synergistic effects between the two drugs. If this proves to be the case, as we predict in our revenue model, we expect that Antegren will cannibalize Avonex’s market share, eroding some of Biogen Idec’s revenues.
There are considerable opportunities within the Alzheimer's disease (AD) market due to an aging population and the high unmet clinical need, particularly within the later stages of the disease. In addition, research over the last 20 years has increased our understanding of the underlying mechanisms of disease progression and provided new targets for drug validation resulting in a number of novel drugs in clinical trials. Anti-Alzheimer's drugs have become one of the largest segments of the neurodegenerative market and accounted for 33% of global sales (US$2.6 billion in 2003 and equivalent to 4% of global CNS drug sales).
In October 2004, Prana announced the results of the open label 84-week "Extension Study" of its phase II clinical trial of PBT-1 (Clioquinol) study, also known as the CQAD study. The Extension Study data demonstrates that PBT-1 treatment for Alzheimer's appears to slow the expected disease progression by about half. The rate of decline in PBT-1 treated patients, compared to the predicted rate of decline, suggests that the drug has a disease-modifying treatment effect, not simply a cognition enhancement effect.
This week, Prana announced it has received a Clinical Trials Authorization (CTA) from the Medicines and Healthcare Products Regulatory Agency (MHRA) of the United Kingdom to initiate the potentially pivotal PLACQUE (Progression Limitation in Alzheimer's: ClioQUinol's Efficacy) phase II/III clinical trial.
ONCOLOGY
Telcyta (Telik) in Ovarian Cancer
Ovarian cancer accounts for 4% of all cancers in women and is the 5th leading cause of overall cancer death. Ovarian cancer tends not to be diagnosed until the disease is quite advanced, with metastases to the upper abdomen (stage III), or further (stage IV). Prognosis for stage III and IV ovarian cancer is very poor with a 15-20% survival rate at 5 years. Ovarian cancers detected earlier have a much higher rate of survival, with those detected in stage I showing a 90% survival rate at 5 years. Due to the late diagnosis and the poor prognosis, the disease remains a challenge to treat.
Telcyta (TLK286) is a novel chemotherapeutic agent currently in phase III studies in solid tumors including ovarian cancer. Telcyta is a glutathione analog that becomes activated by glutathione S-transferase P1-1 (GST P1-1), an enzyme over-expressed in many human cancer cells. It is thought that GST P1-1 breaks Telcyta into two active fragments, a glutathione analog and a cytotoxic fragment that interferes with DNA, RNA and protein functions leading to cell death. Therefore, Telcyta selectively kills GST P1-1 expressing cancer cells.
In phase II studies in ovarian cancer patients, Telcyta demonstrated safety and efficacy as a 3rd line therapy, as a single agent and in combination with Doxorubicin. In these advance platinum refractory and resistant cancer patients, Telcyta treatment gave encouraging disease stabilization rates and objective response rates, with higher response rates observed with the addition of Telcyta to standard chemotherapy over chemotherapy alone. Telcyta also promoted survival as demonstrated in the Telcyta plus Doxil (Doxirubicin; Johnson and Johnson) study in which a median 34.1 week progression-free survival was seen in patients on this drug combination compared to 9.1 weeks typically observed for Doxil alone in this patient population.
The positive data from these studies led to the initiation of two randomized phase III studies: ASSIST (Assessment of Survival in Solid Tumors) 1 and 3. ASSIST-1 is evaluating Telcyta as a monotherapy third line therapy in platinum-refractory or resistant ovarian cancer patients. ASSIST-1 will compare Telcyta directly to standard chemotherapy agents Doxil (doxorubicin) or Topotecan. The second phase III study (ASSIST-3) was initiated recently to evaluate Telcyta as a second line treatment for platinum refractory or resistant ovarian cancer. ASSIST-3 is evaluating Telcyta in two different drug combinations: with Doxil and with Carboplatin. Results from both studies are expected to be released later this year. Telcyta is Telik’s most clinically advanced compound and positive results from these studies will not only add to the value of the company, it will represent a very significant development for ovarian cancer, particularly if Telcyta is shown to extend survival as suggested in phase II studies.
Telcyta has also shown promise in non-small cell lung cancer (NSCLC). Lung cancer is the leading cause of cancer death in men and women. Like ovarian cancer, most lung cancers are not diagnosed until the advance stage which results in poor prognosis. There are two types of lung cancers: non-small and small cell lung cancer. Non-small cell lung cancer accounts for 80% of all lung cancers and remains a highly unmet medical need.
In phase II studies in advanced (stage IIIB or IV) NSCLC patients whose disease progressed following platinum-based therapy, Telcyta monotherapy resulted in an 8% response rate with a 67% overall disease stabilization rate. These results are comparable to those observed with Tarceva. In platinum refractory NSCLC patient, some of whom have also failed EGRF inhibitors, the combination of Telcyta plus Docetaxel resulted in a 27% response rate and a 67% disease stabilization rate.
A pivotal phase III (ASSIST-2) study was initiated last year, comparing Telcyta to Iressa (Gefitinib; AstraZeneca) as a third line agent for NSCLC. The primary endpoint of this study is to demonstrate superiority over Iressa in extending survival. Results from this trial are also expected later this year, and if Telcyta demonstrates superiority over Iressa, an NDA submission is expected before year-end. We are quite confident that Telcyta will show superiority to Iressa, the standard third line therapy for NSCLC at the time of trial initiation, given the lack of effect on survival by Iressa. Iressa was approved in May 2003 for NSCLC without demonstrating any survival benefits, a lack of efficacy which was further confirmed by the Iressa Survival Evaluation in Lung cancer (ISEL) trial. Tarceva is the only treatment, thus far, for NSCLC that has demonstrated a clear benefit in promoting survival. While Telcyta has shown efficacy in disease stabilization, questions remain as to whether it can extend survival in NSCLC patients. In a small follow-up study of Telcyta as a monotherapy, median survival had not been reached at the end of the study, suggesting that Telcyta can promote survival. Results from ovarian cancer patients have also been promising in terms of survival, however, results from one malignancy cannot always be translated to another. We believe that Telcyta will show superiority over Iressa and remain optimistic about the drug’s likelihood of approval.
Prostate cancer is the second most prevalent cancer in men and represents the second most common cause of cancer death in men, after lung caner. Approximately 50% of men over age 50, and 70% of men over age 70, are at risk of developing the disease and due to an ageing population, there is an increase in the incidence of prostate cancer. Like most cancers, early detection results in a very favorable prognosis, while diagnosis of advanced prostate cancer has a poor prognosis. For aggressive or advance prostate cancers, chemotherapy is typically given with hormone therapy.
A novel therapeutic strategy for prostate cancer is Provenge. Provenge (APC 8015) therapy utilizes the patient's own cells. Dendritic cells from the patient’s blood is taken out and loaded with the antigen prostatic acid phosphatase (PAP), an antigen expressed in about 95% of prostate cancer cells. These activated dendritic cells are then infused back into the patients to stimulate the patient’s own immune system, particularly the T cells, to attack the PAP-expressing cancer cells. In the first phase III study (D9901) in metastatic hormone-refractory prostate cancer patients, Provenge showed efficacy in a subset of patients with Gleason scores, a measure of disease aggressiveness, of 7 or less. In these patients, Provenge significantly prolonged survival by 8.4 months compared to placebo. A second phase III study (D9902), recruiting only patients with a Gleason score of 7 or less is underway and results from this trial is expected in the first half of 2005. If the results confirm the subset analyses observed in the first trial, a BLA submission to the FDA is expected before the end of the year. We are eagerly awaiting results from D9902 since Provenge is not only a novel therapy for prostate cancer, but the autologous dendritic cell therapy represents an advancement in immunotherapy that may become relevant for other malignancies and diseases.
PART II-COMPANY OUTLOOK This portion of the outlook will concentrate on three companies within our evaluated company coverage that we feel are well positioned for 2005. In identifying these three, we looked at companies with drugs in larger markets that we feel have above average likelihoods of approval (LOA), are currently undervalued based on their 5 and 10 year drug pipelines and who have an upcoming catalyst or catalysts that could provide a bump-up in the LOA, thereby lifting the probability adjusted revenue and pipeline values.
Amylin (AMLN), Dendreon (DNDN) and Genaera (GENR) are our three choices and in our opinion carry lower, moderate and higher risk and returns with them.
Amylin (AMLN)-Lower Risk
Amylin’s position within the large Type II diabetes market should be solidified in early 2005 with the possible approval of Exenatide by April 30th, 2005. With peak U.S. revenue of $297 million, the Exenatide approval will be a positive for Amylin. We currently project Exenatide LAR for Type II diabetes to have larger revenue potential than Exenatide and a 22% above average LOA. We expect phase II trial data to be released early in 2005, which could lead the way to a phase III trial and a bump up in our LOA.
Amylin also expects to hear from the FDA in March on its response to a second approvable letter is received for Symlin in Type I & II diabetes. While we feel Symlin’s potential revenue is smaller than Exenatide’s, the drug will continue to add to Amylin’s diabetes franchise and limit risk to the stock.
Lastly, we will be looking for Amylin to advance clinical progress in another large indication, Obesity. Top-line results from a phase I trial for AC162352 are expected in early 2005 and while we are only mildly positive on the drug’s prospects (5% above average LOA), the advancement into a phase II trial would add further weight to Amylin’s pipeline.
Based upon these possibly favorable events, we feel Amylin will offer a solid 2005 return with a relatively low amount of risk due to its multi-drug pipeline in large markets.
Dendreon (DNDN)-Moderate Risk
In the first half of 2005, we expect Dendreon to report results from its pivotal phase III trial of Provenge in prostate cancer and to follow up with a BLA filing. With an 84% LOA, we feel Provenge’s chances of coming to market are high. While the filing of the BLA may not lift our probability adjusted revenue projections by much, we feel Provenge’s revenue contribution will be enough to justify significant price appreciation. We will also be looking for Dendreon to announce a major partner for Provenge, which will provide additional muscle behind the drug.
While we feel there’s a low risk of Provenge being denied approval, Dendreon’s valuation rests solely on this one drug, leading to the moderate risk classification.
Genaera (GENR)-Higher Risk
Genaera is one of our top ideas for 2005, primarily due to Squalamine’s potential for success. In late 2004, we initiated coverage of the wet-AMD market in which we highlighted Squalamine as having the highest potential revenue within the market. With a 19% above average LOA, we see Squalamine’s possibility for success very favorable.
Should Genaera report positive phase II Squalamine data and commence a subsequent phase III trial, our LOA will rise, giving more strength to its 5 and 10 year pipelines. Squalamine’s Fast Track status and participation in the CMA Pilot 2 program could also lead to Squalamine being approved before our expected 1/09 date, leading to earlier peak revenue.
Of course with the greater return comes greater risk. While we feel Squalamine’s chances are above average, the drug is still in an early stage of development. Should Squalamine prove to not be a successful treatment for wet-AMD, Genaera could be dead money.