We are initiating coverage of the Osteoporosis/Osteopenia market. According to the National Osteoporosis Foundation 10 million Americans currently have Osteoporosis and another 34 million Americans have low-bone density (Osteopenia). The prevalence of disease is estimated to grow at a rate of 2.4%, with 52 million cases prevailing in 2010. The disease tends to be under-diagnosed and under-treated because it is clinically silent until it manifests in the form of fracture. We estimate that currently only 14% of patients receive medical treatment in the U.S., but with the increasing awareness and bone-density testing, we predict this number to grow to approximately 26.6% by the year 2014. We estimate the drug market for osteoporosis to reach approximately $15.3 billion in the U.S. by the year 2014.

BACKGROUND

Osteoporosis is a metabolic bone disease characterized by low bone mass, microarchitectural deterioration of bone tissue and increased susceptibility to fracture. Bone is a living tissue that undergoes continuous remodeling (turnover), a process that involves bone degradation and removal (resorption) by osteoclasts coupled with new bone formation by osteoblasts. In osteoporosis/osteopenia, bone resorption occurs at a faster rate than bone formation leading to porous bones that lack structural integrity. Osteoporosis is most common in post-menopausal women although men are increasingly diagnosed with the disease. Current FDA approved treatments include estrogens, selective estrogen receptor modulators (SERMs), bisphosphonates and Parathyroid Hormone treatments. The bisphosphonates and SERMs are the first choice of therapy for the prevention and treatment of osteoporosis.

CURRENT AND DEVELOPMENTAL DRUGS

The bisphosphonates are the most frequently prescribed medication for osteoporosis and are indicated for prevention and treatment of osteoporosis in men and post-menopausal women. Bisphosphonates reduce bone turnover and improve bone mineralization and bone mass by inhibiting osteoclast-mediated bone resorption. Three bisphosphonates are currently FDA approved: Fosamax (Alendronate; Merck), Actonel (Risedronate; Procter Gamble), and Boniva (Ibandronate; Roche and GlaxoSmithKline). Once-daily dosing of Boniva was approved in May 2003, however, Boniva is not being marketed until the once-monthly dosing is approved by the FDA, which is expected in the first quarter of 2005.

Estrogen, or hormone replacement therapy, was the gold standard for treating osteoporosis in post-menopausal women, however, due to the increased risk in breast cancer and heart disease their use has been replaced with SERMs. SERMs were developed to provide the beneficial effects of estrogen without the potential disadvantages. In some tissues, such as bone, they mimic the effects of estrogen, while in others they act as anti-estrogens and block unwanted estrogenic effects on uterine and breast tissue. Currently, Evista (Raloxifene; Eli Lilly) is the only approved SERM, however, Lasofoxifene, one of three late-stage SERMs developed by Ligand Pharmaceuticals and Pfizer, is awaiting FDA approval. In a phase II study, Lasofoxifene compared favorably with Evista, eliciting significant improvement in bone parameters, such as bone resorption and bone density, in post-menopausal women.

The only FDA approved therapy that enhances bone formation is Forteo (Teriparatide; Eli Lilly). Forteo contains a fragment of recombinant human Parathyroid Hormone (PTH). PTH is the major hormonal regulator of calcium homeostasis and is a potent stimulator of new bone growth. Unlike anti-resoptive agents, Forteo may have the potential to replace depleted bone stores. Due to potential endocrine effects, Forteo treatment is limited to 2 years and is not recommended for preventative measures. It is only indicated for men and post-menopausal women with severe osteoporosis at high risk of fractures. Like Forteo, Preos (NPS Pharmaceuticals) is an injectable recombinant PTH, however, it is the full-length version of PTH. Early studies have suggested that Preos may pose less of a cancer risk and may be appropriate for a broader patient population than Forteo.

Another biological therapy that has generated much interest for the treatment of osteoporosis is the investigational AMG-162 (Amgen). AMG-162 is a human monoclonal antibody that binds to and inhibits Receptor Activator of Nuclear Factor kappa B (RANK) Ligand. RANK Ligand induces osteoclast-mediated bone resorption. Recent phase II data suggests that AMG-162 increases total bone mineral density at the total hip similar to, or greater than, Fosamax.

The drug candidate most likely to be approved first is Lasofoxifene, for which an NDA was submitted in August 2004. While it is likely to be approved, with a predicted likelihood of approval at 81%, we are not excited by this drug’s potential, since the market for SERMs is shrinking.

Preos is currently in Phase III studies and we predict that it will be FDA approved in 2006. We predict a likelihood of approval of 75%, 8% above average, since Phase III data has, to date, been positive and there already exists a precedence for PTH therapy for the treatment of osteoporosis. Once approved, we predict that Preos will increase the market share for PTH treatment in osteoporosis, since it likely to be used in a broader patient population than Forteo. However, since it requires daily injections, like Forteo, the market for PTH is likely to remain relatively small.

AMG-162, with is unique mechanism of action, is the most anticipated osteoporosis treatment in development. We currently estimate AMG-162 to have a 72% likelihood of approval, only 5% above average since it is a first-in-class agent. If it proves to be as effective, or more effective, than bisphosphonates, we predict the market for AMG-162 to be quite sizable, eroding some of the bisphosphonate market since AMG-162 only requires a twice-yearly dosing.

REVENUE MODELS

Fosamax (Bisphosphonate-Alendronate Sodium)-Merck & Co.
Fosamax is approved for use in both men and women and has been on the market since 1995. In 2003, Fosamax had net worldwide sales of $2.7 billion, with $1.6 billion coming from the U.S. We project peak U.S. revenue to be close to $2 billion in 2007 and peak U.S. market share to be 40% in 2004. Merck’s once-daily and once-weekly patents expire in 2008 and 2012, respectively, and in the U.S. and we expect generics to take share of the market in the following years.

Actonel (Bisphosphonate-Risedronate Sodium)-Proctor & Gamble
Actonel is approved for use in both men and women and has been on the market since 2000. In 2003, Actonel had worldwide revenues of $875 million, with $700 million in the U.S. In 2004 Actonel will become P&G’s fastest drug to reach a billion dollars in sales. We project peak U.S. revenue to be $1.75 billion in 2008 and peak U.S. market share to be 30% in 2007.

Evista (SERM-Raloxifene)-Eli Lilly
As an estrogen treatment, Evista is only approved for use in women and has been on the market since 1997. In 2003, Evista had worldwide revenue of $922 million, with $656 million coming from the U.S. We project peak U.S. revenue to be $836 million in 2013 and peak U.S. market share to have been 16% in 2003.

Forteo (Parathyroid Hormone)-Eli Lilly
Forteo is approved for both men and women but is restricted to severe cases of osteoporosis. In 2003, Forteo has worldwide revenue of $65.6 million, with $61.7 million coming from the U.S. We project peak U.S. revenue of $561 million in 2008 and peak U.S. market share of 1.25% in 2007.

Preos (Parathyroid Hormone)-NPS Pharmaceuticals
Preos is applicable to both men and women and similar to Forteo, Preos requires an injection and is likely to be used in a small patient population. We predict Preos will be approved in the U.S. in early 2006 and will have peak U.S. revenue of $1,719 million in 2013 and peak U.S. market share of 2.5% in 2011.

AMG-162 (RANKL)-Amgen
AMG162 will potentially be used in both men and women. We predict AMG162 will be approved in the U.S. in 2009 and will have peak U.S. revenues of $2.3 billion in 2014, with 15% market share in the same year.

For an overview of our drug coverage within the market, please see our Osteoporosis/Osteopenia drug pipeline. We have added new revenue models for Merck’s Fosamax, P&G’s Actonel, Lilly’s Evista, Lilly’s Forteo, NPS’s Preos, and Amgen’s AMG162.