Multiple Sclerosis (MS) is an inflammatory disease of the Central Nervous System characterized by the destruction of myelin, the protective sheath that promotes signal conduction in nerve cells. Myelin damage can result in scar tissue (sclerosis), nerve cell death and attenuated neural transmission, leading to irreversible neurological deficit and disability. We estimate the MS market to reach $6.85 billion in 2014.

BACKGROUND

There are several forms of MS: RRMS, SPMS, PRMS, and PPMS. In most patients, disease usually begins as relapsing remitting MS (RRMS), characterized by episodes of disease exacerbation (relapses) followed by periods of partial or complete recovery called remission. Within the first decade of disease, approximately 50% of RRMS patients will develop secondary progressive MS (SPMS), which is characterized by a progressive worsening of disease between relapses. A third form of relapsing MS is progressive relapsing MS (PRMS), which follows a progressive course of disease from onset, punctuated by relapses and partial recovery after the relapse. The fourth main type of MS is primary progressive MS (PPMS), whereby the disease progresses from onset with no remissions. The MS patient population consists of about 40-45% with RRMS, 40-45% with SPMS, 10% with PPMS, and 5% with PRMS.

CURRENT TREATMENTS

Therapies for MS have improved considerably in the last decade with the approval of several disease modifying drugs (DMDs). These are categorized into beta interferons and non-interferons. Beta interferons are the most commonly prescribed and include two interferon beta 1a compounds, Avonex (Biogen) and Rebif (Serono), and one interferon beta 1b compound, Betaseron (Chiron). All three treatments are approved for all forms of relapsing MS, which represents 90% of the patients treated for MS. Avonex is also indicated for new patients who have had a single clinical episode consistent with MS. The main differences between these 3 drugs lie in their dosage and delivery with Avonex only requiring a weekly intramuscular injection, Betaseron requiring a subcutaneous injection every other day, and Rebif requiring subcutaneous injections three-times per week. Avonex is the most widely used out of the three interferons due to, in part, its U.S. orphan drug status protection and its once-weekly dosing and consequent fewer side effects. However, with the loss of orphan drug status protection in 2003 and with recent studies showing that more frequent dosing of beta interferons exerting greater efficacy, Avonex has been, and will continue, to lose market share.

Teva’s Copaxone (glatiramer acetate) and Serono’s Novantrone (mitoxantrone) are non-interferon treatments for MS. Copaxone is an analog of myelin basic protein (MBP) and is thought to serve as a MBP decoy, preventing T cell-mediated destruction of MBP. Copaxone is approved for RRMS and has been shown to significantly reduce the annual relapse rate in these patients. Novantrone is an anti-cancer drug that suppresses the activity of T and B cells and macrophages, cells thought to play a pathogenic role in MS. It is indicated for patients with SPMS, PRMS and worsening cases of RRMS, which we predict encompasses 60% of the treated patients. While it is approved for many types of MS, its use is limited due to its IV infusion delivery, cumulative dose, and potential cardiac and hematological toxicities.

DRUGS IN DEVELOPMENT

Until recently, MS had been under-treated with DMDs, with patients generally obtaining treatments for relapses or for advanced disease. However, with recent evidence showing a slowing of nerve damage with DMDs, new guidelines encourage aggressive management of disease at diagnosis. We believe this will expand the DMD market at an optimal time for Antegren’s release, should it obtain FDA approval. Antegren (natalizumab, Elan/Biogen), the first selective adhesion molecule inhibitor, is a humanized monoclonal antibody that blocks alpha4beta1 integrin (VLA-4). Antegren thus inhibits VLA4-mediated leukocyte migration, and in the case of MS, prevents leukocyte migration across the blood brain barrier, inhibiting subsequent neuronal degradation and inflammation. Due to its novel mechanism of action and the recently released one-year interim data from the AFFIRM trial, we believe Antegren has a high probability for approval, with a 91% likelihood of approval, 10% above average. The FDA action date is expected on November 25, 2004.

The interim AFFIRM trial data showed that Antegren reduced relapse rates by 66% in RRMS patients, exceeding the 30% generally observed with currently approved treatments for RRMS. Full two-year results are not expected until 2005, when functional data such as the expanded disability status scale (EDSS) is expected. The interim data for Antegren is not only exciting, giving a new mechanism to tackle MS, but the efficacy data suggests that Antegren can potentially erode market share from the beta interferons and Copaxone since it more than doubles the average relapse rate reduction.

Of interest to us 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. This issue will become more apparent when data from the SENTINEL trial, which evaluates the combination of Antegren and Avonex in RRMS, is released in late November as part of the FDA response to Antegren. Earlier studies have shown that these two drugs can be co-administered, however interim efficacy data has not been made available, which leads us to speculate that the drug combination does not provide additional benefits over single drug treatments. If this proves to be the case, as we predict in our revenue model, we expect that Antegren may indeed cannibalize Avonex’s market share.

In addition to Antegren, Biogen Idec has another drug in development for the treatment of MS. Rituxan (Rituximab, Biogen/Genentech) is an anti-CD20 antibody that binds the CD20 antigen on the surface of B cells, marking these B cells for destruction. Rituxan was approved for CD20-positive non-Hodgkin’s lymphoma, but is now being evaluated in autoimmune diseases where B cells are thought to contribute. Rituxan is currently being studied in a Phase II/III clinical trial to evaluate safety and efficacy in patients with PPMS. The PPMS market remains an unmet medical need so this trial not only represents an important study for MS patients, but may also expand the MS market for Biogen, which already has Avonex, and potentially Antegren.

Another MS treatment in development is MBP8298 (BioMS Medical) comprising a small fragment identical to MBP. In a phase II study of MBP8298, SPMS patients with a specific haplotype (DR2/DR4) showed stabilization of disease with no detectable disease progression. The DR2/DR4 haplotype occurs in 75% of MS patients, enabling MBP8298 to be effectively used in 45% of the patients treated for MS. Although the results were highly encouraging, the patient sample in this trial was very small. The recently initiated phase III trial in Canada will help to determine the efficacy of MBP8298 and if further trials achieve similar results, MBP8298 may become a first line treatment for SPMS patients with DR2/DR4 haplotypes.

REVENUE MODELS

(Note: Unless otherwise noted, referenced market shares below are based on patients treated by drug/total patients treated with MS)

Avonex (Interferon beta-1a)-Biogen Idec
Avonex is currently the highest revenue generating MS drug, with $1.17 billion in global sales in 2003, $800 million of which came from U.S. sales. We project 2004 sales of $1.4 billion, with $926 million coming from the U.S. We estimate Avonex’s peak U.S. revenue to be just over $1 billion in 2005. We estimate Avonex to have been used by 23.3% of the U.S. treated patients in 2003. We predict Avonex’s peak market share to reach 27.0% in 2005. Avonex’s market share should start to decline after 2005, not only as Antegren comes onto the market, but as other drugs such as MBP8298 gain approval and take share in more advanced cases of MS. Avonex could perform better than we predict should it be shown to be an effective as a combination therapy with Antegren.

Betaseron (Interferon beta-1a)-Chiron Corp.
Betaseron currently generates more revenue outside the U.S. and we predict it to continue to do so. In 2003, Betaseron had $872 million in revenue, with $325 million coming from the U.S. We project $976 million in revenue for 2004, with $368 coming from the U.S. Because Betaseron is more frequently dosed and with recent studies suggesting this to be more effective than less frequent dosing beta interferons, we do not foresee it losing as much market share to Antegren as Avonex. As a result, Betaseron’s revenues will continue to grow slightly less than the overall market growth. We predict peak U.S. revenue of $505 million to occur in 2014. We predict peak U.S. market share to be 11.7% in 2005.

Copaxone (Glatiramer acetate)-Teva Pharmaceutical
In 2003, Copaxone generated $721 million in worldwide sales, with $495 coming from the U.S. We project Copaxone to grow to $955 million in worldwide sales in 2004, with $627 million coming from the U.S. Like other MS treatments, we project the drug’s market share to decline after the introduction of Antegren. We predict peak U.S. revenue be $657 million in 2013, with peak U.S. market share of 17.4% in 2004.

Novantrone (Mitoxantrone)-Serono S.A.
While Novantrone can potentially be used in 60% of the patients, many choose not to use it and the ones that do can only use it for a short period of time. Novantrone achieved $31 million in worldwide sales in 2003, $15 million of which came from the U.S. We project 2004 revenue to be $33 million, with $16 million coming from the U.S. We estimate peak U.S. market share to be the lowest in our coverage at 3.6% in 2011, with peak U.S. revenue at $58.4 million in 2014. Note that while Serono has licensed the rights of Novantrone for oncology indications to OSI Pharma, it will maintain 100% of the rights of Novantrone for MS.

Rebif (Interferon beta-1a)-Serono S.A.
Rebif is another drug that has performed much better outside the U.S. In 2003, Rebif had sales of $819 million, with only $189 million in the U.S. For 2004 we project Rebif to achieve over $1 billion in sales worldwide, with $295 million coming from the U.S. We predict Rebif’s market share will continue to grow through 2008, when it reaches peak U.S. market share of 9.0% of the patients treated.

Antegren (Natalizumab)-Elan
From a peak U.S. revenue standpoint, we foresee Antegren becoming the largest MS drug. This is not only due to Antegren’s higher price tag over the beta interferons, but also due to a high degree of market share based on its effectiveness. We project peak U.S. revenue to be close to $1.7 billion in 2011 and Antegren to take 22.5% of the patients treated for MS in 2010.

MBP8298 (Myelin Binding Protein)-BioMS Medical Corp.
Because MBP8298 has the potential to be a highly effective treatment within patients that possess DR2/DR4, we predict the drug to do well within its eligible patient population, taking share from other treatments that were historically used in these patients. We project MBP8298 to have peak U.S. revenue of just under $400 million in 2014 accounting for 6.8% of the patients being treated for MS.

Rituxan (Rituximab)-Biogen Idec
While we currently predict Rituxan to only be used in PPMS patients (10%), it will have a high degree of market share within this setting, as there are currently very few treatment options for these patients. We estimate Rituxan to gain 45% of the PPMS patients by 2013, corresponding to 4.5% of the patients treated for MS. We estimate peak U.S. revenue of $260 million in 2014.

Campath (Alemtuzumab)-Ilex Oncology
Campath for MS is the least clinically advanced drug within our coverage. Within our 10-year outlook, we estimate Campath to have peak U.S. revenue of $406 million in 2014. Campath should continue to ramp beyond our 10-year outlook.

For an overview of our drug coverage within the market, please see our Multiple Sclerosis drug pipeline. We have updated and added revenue models for Biogen’s Avonex, Chiron’s Betaseron, Teva’s Copaxone, Serono’s Novantrone, Serono’s Rebif, Elan’s Antegren, BioMS’s MBP8298, Biogen’s Rituxan, and Ilex’s Campath.