There is a significant unmet need for treating wet age-related macular degeneration (wet AMD), given the aging population and the lack of a U.S. Food and Drug Administration (FDA)-approved therapy for the approximately 75% of cases of wet AMD that arise from the minimally classic and occult forms of the disease. This opens the door for the commercial success of more than a single drug. 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 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.

We have also updated and added the 7 drug revenue models for wet AMD listed at the end of this analysis.

BACKGROUND

Age-related macular degeneration (AMD) is the leading cause of blindness in industrialized nations in people over the age of 50, primarily because there is a lack of effective treatments for the disease. There are two types of AMD - dry, or atrophic or non-exudative, and wet, or exudative. Although the wet type of AMD constitutes only 10-15% of all AMD cases, it is responsible for 90% of blindness attributable to this condition. Annually, there are approximately 500,000 new cases of wet AMD worldwide. Since the incidence of AMD increases with advancing age, it is estimated that 6.3 million people will have visual loss due to wet AMD in 2030 and 500,000 people will lose their sight annually from the disease.

Wet AMD is characterized by the development of new blood vessels beneath the retina, known as choroidal neovascularization (CNV). CNV can be subtyped into classic and occult forms according to the composition of lesions appearing in a fluorescein angiograph.

Classic CNVs appear as discrete lesions with early hyper-fluorescence and with late leakage of the fluorescein dye into the overlying neurosensory retinal detachment. Occult CNVs appear as either late leakage of undetermined source or fibrovascular pigment epithelial detachments. Classic CNV and occult CNV can occur within the same lesion. The following terminology is generally used to describe the composition of wet AMD lesions:

Predominantly Classic – lesions in which 50% or more of the entire area is classic CNV but some occult CNV is present (25% of wet AMD patients)

Minimally Classic – lesions in which less than 50% but more than 0% of the area is classic CNV (35% of wet AMD patients)

Occult – lesions in which there is occult CNV with no evidence of classic CNV (40% of wet AMD patients)

Patients who are affected by wet AMD in one eye have an increased risk of developing it in the other eye. One study showed that 26-35% of patients with CNV in one eye developed CNV in the other eye within 5 years.

CURRENT TREATMENTS

Currently, the FDA has approved two treatments for wet AMD - laser photocoagulation and photodynamic therapy – that are appropriate for only a limited percentage (15-35%) of patients.

Laser Photocoagulation
Laser photocoagulation is a surgical ablative treatment for predominantly classic wet AMD that is not completely effective, may cause partial vision loss, and can only be used a limited number of times. It also only treats a subset (60%) of predominantly classic wet AMD patients. There is a recurrence rate of 50% within 2 years following photocoagulation.

Photodynamic Therapy
Visudyne Photodynamic Therapy (PDT), marketed by QLT Therapeutics and Novartis, is an intravenous drug treatment activated by a non-heat-producing laser that was approved by the FDA in 2000 for predominantly classic wet AMD. Visudyne PDT alters the course of wet AMD, slowing abnormal vessel growth and progression of vision loss. In contrast to laser photocoagulation, Visudyne PDT can be used in multiple treatments without significant treatment-related loss of visual acuity. Nevertheless, Visudyne is only effective in stabilizing the disease and does not help in improving visual acuity.

In spite of its therapeutic limitations, QLT has been actively working to extend the label for Visudyne to include the minimally classic and occult forms of wet AMD. Visudyne PDT is approved for the treatment of both predominantly classic and occult forms of wet AMD in Europe. In Japan, Visudyne PDT is approved for the treatment of all forms of wet AMD. Earlier this year, Visudyne was approved for Medicare reimbursement covering specific types of the occult and minimally classic forms of wet AMD. In October, QLT announced that Visudyne did not achieve statistical significance after 12 months of testing with "occult" AMD patients and that the clinical study will continue to its 24-month endpoint. That clinical study is designed to confirm earlier testing with occult patients, which demonstrated Visudyne's efficacy after two years of treatment but not after one year. As a result, QLT will likely file for U.S. FDA approval in 2006, instead of 2005, to treat occult patients with Visudyne PDT. We estimate that this approval, if obtained, will expand the patient eligibility for Visudyne from about 35% to about 70% of wet AMD cases.

QLT is also investigating the use of Visudyne PDT as a combination therapy for wet AMD. At the 2004 Association for Research in Vision and Ophthalmology (ARVO) annual meeting, QLT presented data demonstrating that combination treatment with Visudyne PDT and the steroid triamcinolone acetonide, the active component of Regenera's Visagen product under development for the treatment of diseases of the back of the eye, was better than with PDT alone.

DRUGS IN DEVELOPMENT

There are three promising new treatments for wet AMD that are closest to FDA approval: Macugen (pegaptanib sodium, Eyetech/Pfizer), Lucentis (ranibizumab, Genentech), and Retaane (anecortave acetate, Alcon). All three drugs have a mechanism of action based on blocking new blood vessel formation, angiogenesis, by inhibition of vascular endothelial growth factor (VEGF) in the eye.

Eyetech’s Macugen, a small molecule, blocks a splice of VEGF, while Genenetech’s Lucentis, a monoclonal antibody to VEGF, blocks all isoforms of VEGF. These compounds must be administered directly into the vitreous by injection 9 and 13 times per year for Macugen and Lucentis, respectively. Penetrating the eye so many times theoretically increases the likelihood of infection, retinal detachment, or vitreous hemorrhage and each injection requires a separate office visit. It is also not as appealing an administration route as intravenous injection for Visudyne PDT. Both Macugen and Lucentis are being developed to treat all three forms of wet AMD, which will overcome one key limitation with Visudyne PDT. Both drugs have also shown a visual acuity improvement benefit in addition to visual acuity stablization in clinical trials, which addresses another limitation with Visudyne PDT.

Eyetech’s Macugen
Eyetech completed the filing of an NDA for Macugen for the treatment of wet AMD in June of 2004. The FDA’s Dermatologic and Opthalmic Drugs Advisory Committee discussed Eyetech’s New Drug Application (NDA) on August 27, 2004. Due to the NDA’s Pilot 1 priority review status, the committee did not vote to recommend or not recommend approval. However, the committee did unanimously agree that no more trial data were needed for the FDA to arrive at an approval decision. The Macugen PDUFA date has been set for December 17, 2004.

Despite the lack of an approval vote from the advisory committee, we remain optimistic about the Macugen’s approval prospects for several reasons. First, Macugen was evaluated with one of the largest randomized trials ever conducted for macular degeneration. The study assessed approximately 1,200 patients by administering three different dose levels of medication and one placebo arm. Patients in all three arms showed treatment benefit. Second, treatment with Macugen can result in the improvement of visual acuity, instead of only stabilizing the disease as with Visudyne PDT. In a Phase II study with Macugen, which was analyzed at 3-months, approximately 25% of patients had a three line improvement in acuity with Macugen alone and many more had the same level of improvement when Macugen and PDT were used together. The pivotal Phase III study, which included patients with all forms of wet AMD, and some being already being treated with Visudyne PDT, showed only 6% of patients having a three-line improvement in acuity after one year. However, only 10% of patients treated lost six or more lines of acuity after one year. Most patients experienced stabilization or a slowdown in disease progression. Lastly, Eyetech recently announced that the treatment effect with Macugen extends for two years in patients with wet AMD. A treatment benefit was also seen for patients who received Macugen for two years compared to those only receiving one year of therapy.

Genetech’s Lucentis
Market approval for Lucentis trails Macugen by about one year. The company completed enrollment for its Phase III trial earlier this year. Impressive Phase II data showed that patients initially suffering visual acuity demise in the usual care group experienced acuity improvements when crossed over to receive Lucentis. See our coverage of the Lucentis Phase II trial data for further details.

Unlike Eyetech’s single all-comers Phase III trial, Genentech is conducting two separate Phase III trials. MARINA is a randomized, double-blind, sham-injection controlled study assessing two dose levels of Lucentis in 720 patients with minimally classic or occult wet AMD. ANCHOR is a randomized, double-blind, active treatment-controlled, study comparing two different dose levels of Lucentis to Visudyne PDT in approximately 426 patients with predominantly classic wet AMD.

Alcon’s Retaane
Retaane is the first of a new group of molecules known as angiostatic cortisones. It works by slowing or stopping new blood vessel growth in wet AMD so that less leakage and retinal damage occurs. Retaane is delivered using a novel procedure known as posterior juxtascleral depot. This technique uses a blunt-tipped, curved cannula to deliver drug to the sclera, near the macula, without penetrating the globe. Retreatment is only required twice per year. There have been no clinically-relevant safety issues associated with Retaane or the posterior juxtascleral depot procedure used in clinical studies.

Retaane is also in final-stage trials for the treatment of the classic forms of wet AMD. Retaane also has an FDA fast track designation. The drug has shown promise in its clinical studies, with 12% of treated patients experiencing an improvement in vision of two lines or more. However, in a press release on October 15th, Alcon announced that a clinical trial of of Retaane failed to meets its primary endpoint, which was non-inferiority to Visudyne. See our coverage of the October 15th Alcon announcement for further details. Alcon identified drug reflux and treatment interval as two controllable factors that negatively impacted the overall results of its study.

Alcon plans to continue analyzing all the data from this study and to submit its NDA for Retaane to the FDA by the end of the year. We have downgraded our likelihood of approval for Retaane and believe that the FDA is likely to require additional studies on Retaane before approval, which will delay market entry of the drug.

Other Emerging Treatments for Wet AMD:
Miravant’s Photrex
Miravant Medical Technologies’ drug is a photodynamic therapy drug, similar in mechanism of action to Visudyne. Photrex has shown a visual acuity benefit and slowed the progression of CNV lesions in two independent Phase III clinical trials of patients with the classic form of wet AMD. There is no major competitive advantage for Photrex over Visudyne. Photrex does have a longer half-life in the body following intravenous administration, meaning that those who are treated have to stay out of the sun longer after injection. In June of 2004, the FDA accepted the NDA filing for Photrex and also granted it a Priority Review designation. On September 30, 2004 the company announced that it had received an approvable letter from the FDA, which included a request for a confirmatory clinical trial. We have downgraded our likelihood of approval for Photrex. See our analysis of the Photrex Phase III clinical data presented at the 2004 American Academy of Ophthalmology (AAO) meeting in New Orleans for further details.

Genaera’s Squalamine
Genaera’s Squalamine directly interrupts and reverses multiple facets of the angiogenic process. Working within activated endothelial cells, squalamine inhibits growth factor signaling including VEGF, integrin expression, and reverses cytoskeletal formation, thereby resulting in endothelial cell inactivation and apoptosis. Intravenous squalamine delivery is less invasive than intravitreal delivery and also avoids the complications associated with intravitreal injections. Intravenous delivery also means that the second eye can be treated with no additional risk. In a Phase I/II study with Squalamine, which was analyzed at 2-months, approximately 33% of patients had a three line improvement in acuity. Prophylactic therapy in high-risk AMD patients is a longer-term potential development option for Squalamine. Even if Squalamine only shows comparable long-term efficacy and safety relative to Macugen and Lucentis, its intravenous delivery route could make it the leader in the anti-angiogenic therapeutic class. We are very optimistic about the Squalamine’s approval prospects.

Wet AMD Competitive Landscape:
The competitive landscape for wet AMD looks as follows:

REVENUE MODELS
LOA=Likelihood of Approval

Visudyne-QLT-Approved
Visudyne is currently the only approved drug for wet AMD in the U.S. with U.S. sales of approximately $300 million in 2003. We project peak U.S. revenue of $528 million to occur in 2008.

Macugen-Eyetech-92% LOA(11% Above Ave.)
We predict Macugen to reach peak U.S. revenue of $575 million in 2012. Based upon Macugen’s contribution to Eyetech’s revenue, Eyetech continues to be overvalued when looking at its 5-year pipeline and when looking at its 10-year pipeline.

Photrex-Miravant Medical-76% LOA(5% Below Ave.)
Photrex should achieve peak U.S. revenue of $113 million in 2013.

Retaane-Alcon-67% LOA(14% Below Ave.)
Retaane is projected to have peak U.S. revenue of $129 million in 2013.

Lucentis-Genetech-86% LOA(19% Above Ave.)
We predict Lucentis to be the second largest revenue generating wet AMD drug, reaching $585 million in peak U.S. sales in 2014.

Squalamine-Genaera-47% LOA(17% Above Ave.)
We are most excited about Squalamine’s potential in the wet AMD market. We currently project the drug to have $702 million in U.S. sales in 2014. Based on Squalamine’s contribution to Genaera’s future revenue, we currently view as significantly undervalued based upon its 10-year pipeline. However, there are risks associated with Genaera, as its valuation is heavily reliant on Squalamine’s success.

Panzem-EntreMed-3% LOA(3% Above Ave.)
Panzem is still very early in development and difficult to predict what type of impact it may have on EntreMed’s future valuation. We currently predict Panzem to reach $139 million in U.S. sales in 2014.