Bacterial skin and skin structure infections (SSSI) are among the most frequently seen infectious entities in the community setting. A wide variety of SSSI exist ranging from simple infections (uncomplicated) to complicated SSSI which can be fatal. Each year, there are nearly 2.5 million cases of complicated skin and skin-structure infections (cSSSI) in the United States and approximately 400,000 patients with cSSSI who require hospitalization.

The increase in bacterial resistance to antimicrobial drugs has led to increased efforts to develop new agents that can tackle these resistant pathogens. Of the drugs in clinical development, there are 3 awaiting FDA approval for cSSSI: Dalbavancin, Merrem, and Tygacil. These new antimicrobials have demonstrated effectiveness in the treatment of cSSSI, particularly in eradicating drug-resistant pathogens, and should become useful alternatives to current treatments. Due to the potential for resistance development, we believe that these agents will be reserved for serious and life threatening cases or those suspected to be caused by resistant strains.

BACKGROUND

Complicated SSSI typically involve gram-positive pathogens such as Staphylococcus aureus. In the U.S., S. aureus is the most common cause of skin and skin structure infections, as well as of invasive infections acquired in hospitals. Treatment of serious S. aureus infections has become challenging due to the emergence of drug resistance, particularly methicillin-resistant strains. In Europe, recent reports indicate that more than 25% of S. aureus infections are caused by methicillin-resistant S. aureus (MRSA), and the majority of these isolates are resistant to additional antimicrobials. For the life-threatening infections caused by MRSA, the only viable treatment is Vancomycin (Vancocin; Eli Lilly), a glycopeptide antibiotic that has been available since the 1950s. However, Vancomycin, the so called “antibiotic of last resort”, is no longer invincible with the development of resistant strains including Vancomycin-intermediate and Vancomycin-resistant S. aureus.

These resistant strains initially occurred almost exclusively in the institutional (hospital) setting however, outbreaks of community-associated MRSA skin infections have recently been documented in correctional facilities and athletic teams in the U.S. Thus, there is a critical need for new anti-microbial agents that are effective against the increasing number of resistant strains.

There have only been two new antimicrobials that have gained FDA approval for MRSA cSSSI in the last 40 years:Zyvox and Cubicin. Zyvox (Linezolid; Pfizer) is the first oxazolidinone antibiotic to be approved for cSSSI. Zyvox’s bactericidal effects are due to its ability to inhibit bacterial protein synthesis. In phase III studies, Zyvox’s demonstrated comparable efficacy to Oxacillin/Dicloxacillin or Vancomycin at treating SSSI including MRSA. Unlike most antimicrobials for cSSSI, Zyvox can be dosed orally (Zyvox has both oral and IV formulations) and thus provides dosing convenience for physicians and patients.

Cubicin (Daptomycin; Cubist) is a first-in-class cyclic lipopeptide that has a distinct mechanism of action – it binds to bacterial cell wall and causes membrane depolarization, disrupting bacterial membrane function. Cubicin has potent bactericidal activity against most Gram-positive organisms including resistant strains. In 2 large phase III studies, Cubicin demonstrated comparable efficacy to penicillins (such as oxacillin, cloxacillin, or flucloxacillins) or Vancomycin in treating cSSSI including those caused by MRSA.

There are a few new antimicrobials awaiting FDA approval including Dalbavancin, Tygacil, and Merrem, and several others in late stage clinical development such as Ceftobiprole, Oritavancin, and Telavancin. Of these, Dalbavancin, Oritavancin, and Telavancin are newer generation glycopeptides that have a similar mechanism of action of Vancomycin and can potentially replace Vancomycin as drugs of last defense. Tygacil and Ceftobiprole have different mechanisms of action and add important options to the antimicrobial arsenal.

With their first-to-market advantage, we believe that Cubicin and Zyvox will lead the new antimicrobial market. With the exception of Merrem, which has been available for almost a decade for other bacterial infections, we believe that these newer antimicrobials will be used cautiously. To circumvent potential resistance development these newer agents will probably be reserved for life-threatening situations and/or when resistant pathogens are suspected to prevent drug resistance development.

DRUGS IN DEVELOPMENT

Drugs awaiting FDA approval

Dalbavancin (Vicuron)
Dalbavancin (Vicuron) is a second-generation glycopeptide antibiotic that belongs to the same class as Vancomycin. Dalbavancin was developed to be more potent than Vancomycin and indeed has shown potent bacteriocidal (bacteria killing) effects. In vitro studies have shown that Dalbavancin is the most potent antibiotic in its class against difficult to treat Gram-positive bacteria including MRSA and methicillin-resistant Staphylococcus epidermidis (MRSE). Dalbavancin also possesses a much longer half-life than Vancomycin and only requires once-weekly dosing, which helps reduce the likelihood of cathether-related infections due to the fewer administrations.

In phase III studies comprising more than 1,500 patients with skin and soft tissue infections (SSTIs) caused by Gram-positive bacteria, Dalbavancin was shown to be comparable to Zyvox (Linezolid) in curing complicated SSTIs. Importantly, in SSTIs caused by MRSA, Dalbavancin showed comparable efficacy to Vancomycin. Vicuron filed for approval with the FDA in December 2004 for Dalbavancin for the treatment of complicated SSTI. Dalbavancin was granted priority review status and is expected to be approved by the FDA on June 21, 2005.

Tygacil (Wyeth)
Tygacil (Tigecycline), a modified tetracycline, is a first-in-class glycylcycline antibiotic designed to circumvent two of the more commonly evolved drug-resistance mechanisms: efflux pumps and ribosomal protection. Tygacil inhibits both protein synthesis by binding to and blocking the activity of the bacterial 30S ribosomal subunit required for bacterial protein synthesis. In vitro studies have demonstrated that Tygacil has activity against most Gram-negative and Gram-positive bacteria including atypical organisms. Moreover, Tygacil has potent activity against resistant Gram-positive bacteria including penicillin-resistant S pneumoniae, vancomycin-resistant enterococci and MRSA with a low potential for developing resistance.

An NDA was submitted for Tygacil for the treatment of SSSI and intra-abdominal infections in December 2004. Tygacil was granted priority review status and we expect it to gain FDA approval for both indications in June 2005 based on positive clinical data. Phase III data were presented at the 44th Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) in November 2004. Of the 439 clinically evaluable cSSSI patients, Tygacil demonstrated comparable efficacy to a Vancomycin/ Azactam (Aztreonam) combination with clinical cure rates of 84% and 87%, respectively.

Merrem (AstraZeneca)
Merrem (Meropenem) is a broad-spectrum carbapenem antibiotic that inhibits bacterial cell wall synthesis by binding to penicillin-binding proteins (PBP). Merrem was granted FDA approval for intra-abdominal infections and bacterial meningitis. A sNDA was submitted in August 2004 for the cSSSI indication and should receive FDA approval for this indication in June 2005. Data from the phase III study, which enrolled 1076 patients, showed that treatment with Merrem resulted in a clinical cure rate of 86% compared to 83% with Primaxin (Imipenem/Cilastatin) treatment. Merrem also demonstrated comparable efficacy in bacterial eradication to Primaxin.

Since Merrem has been available since 1996, and since clinicians are familiar with its use for other infectious diseases, we believe that Merrem has a distinct advantage in uptake over other antimicrobial drugs awaiting FDA approval.

Drugs in phase III studies

Telavancin (Theravance)
Telavancin (TD-6424) is a novel injectable glycopeptide antibiotic that has activities against a broad spectrum of Gram-positive bacterial. Like other glycopeptides, Telavancin inhibits peptidoglycan synthesis and thus bacterial cell wall synthesis. In addition, Telavancin also increases bacterial membrane permeability, thus disrupting membrane integrity. The multiple mechanisms of action of the drug are thought to reduce the likelihood of bacteria developing resistance to the drug. Telavancin was granted fast track status by the FDA for complicated SSSI and is currently in phase III studies.

Drug resistance studies were presented recently at the European Congress of Clinical Microbiology and Infectious Disease. These preclinical studies were designed to evaluate the potential for resistance development to Telavancin, a panel of S. aureus, including MRSA and vancomycin-sensitive and –resistant enterococci (VSE and VRE, respectively). Telavancin showed potent activity against a broad spectrum of gram-positive bacteria including the MRSA, VSE and VRE strains. Moreover, following continuous exposure for 20 consecutive passages, the maximum increase in Telavancin MIC was less than or equal to 4-fold for most organisms, suggesting that Telavancin possessed a low potential for resistance development.

In a phase II study, called FAST 2, Telavancin demonstrated similar efficacy to Vancomycin in terms of clinical cure rates in cSSSI patients. Moreover, in patients with MRSA, Telavancin was superior to Vancomycin with eradication achieved in 92% of cases compared to 68% for Vancomycin treated patients. With its superiority over Vancomycin for treating MRSA infections, we believe Telavancin will most likely to be the glycopeptide antibiotic of choice for life-threatening MRSA cSSSIs.

Oritavancin (InterMune)
Oritavancin (LY333328) is a semi-synthetic second-generation glycopeptide antibiotic that has broad-spectrum activity against gram-positive bacteria. Unlike other glycopeptides, Oritavancin is bacteriacidal, meaning that it kills the bacteria, not just prevent further growth. Oritavancin inhibits cell wall synthesis, like all glycopeptides, however, it also inhibits the transglycosylation, an event involved in cell wall synthesis, but this extra mechanism accounts for its effectiveness against vancomycin-resistant bacteria.

Oritavancin is currently in phase III studies for cSSSI. Early data from their pivotal phase III study showed Oritavancin to have comparable efficacy to a Vancomycin/Keflex (Cephalexin) combination. In this study, Oritavancin treatment resulted in a clinical cure rate of 78.6% compared to 76.2% for the vancomycin/Keflex control. Oritavancin also reduced the duration of treatment with patients requiring 5 days of Oritavancin compared to 11 days for the combination control. In addition, Oritavancin possessed a long half-life, which allows for a once-weekly dosing, thus reducing the risk of complications from injections.

Ceftobiprole (Basilea Pharmaceutica)
Ceftobiprole (BAL5788) is being developed by a Swiss company, Basilea Pharmaceutica AG, in collaboration with Johnson and Johnson. Ceftobiprole is a first-in-class broad-spectrum cephalosporin designed to bind to the penicillin-resistant targets in MRSA including penicillin binding protein 2a (PBP 2a). By targeting the penicillin-resistant targets, Ceftobiprole has potent bactericidal activity towards MRSA and penicillin-resistant Streptococcus pneumoniae (PRSP). In vitro studies have demonstrated that Ceftobiprole has potent activities against Gram-positive as well as Gram-negative pathogens with a low potential to induce resistance. Ceftobiprole received fast-track designation by the FDA in March 2003.

In phase II studies, Ceftobiprole was shown to cure all evaluable patients enrolled in the study. Importantly, microbiological analyses on baseline bacterial cultures taken before, during, and after treatment showed no increases in the minimal inhibitory concentration (MIC) which indicates that Ceftobiprole has a low potential for developing drug resistance. Ceftobiprole is currently in phase III studies for cSSSI called the STRAUSS (study of ceftobiprole in resistant staphylococcus aureus skin and skin structure infections) study which will evaluate Ceftobiprole compared to vancomycin in approximately 700 patients.

REVENUE MODELS

Zyvox (Pfizer)
Since being approved in Spring 2000, Zyvox has produced revenues of $181 million in 2003 and grown to $463 million in 2004, with $339 million in U.S. sales. Zyvox is projected to grow to 25% peak market share in 2006 and 2007. Being first-to-market in a new class of drugs, and priced at almost four times higher than other treatments, we project Zyvox to achieve the greatest level of sales among the eight drugs included in this report. We project 5 and 10-year U.S. sales of $836.5 million and $1.2 billion with worldwide 5 and 10-year revenues of $1.75 billion and $2.2 billion, respectively.

Cubicin (Cubist)
We project Cubicin for cSSSI to achieve slightly less penetration than Zyvox, at 22.5% in 2007 and 2008. We project 5 and 10-year U.S. revenues of $255.8 million and $347.6 million with worldwide 5 and 10 year projections of $564.0 million and $789.3 million, respectively.

Dalbavancin (Vicuron)
We expect Dalbavancin to be approved in June 2005. We project 5 and 10-year U.S. revenues of $63.4 and $80.9 million with worldwide 5 and 10-year revenues of $142.5 million and $162.4 million, respectively.

Tygacil (Wyeth)
Tygacil should receive FDA approval in June 2005. We project Tygacil in cSSSI to achieve 5 and 10-year revenues of $98.0 million and $137.7 million in the U.S. and $220.1 million and $276.4 million worldwide, respectively.

Merrem (AstraZeneca)
Merrem should also gain FDA approval for cSSSI in June 2005. We predict that it will gain more market share for this indication than some of the other newer treatments as it has been available since 1996 and physicians are familiar with the drug. We project Merrem to achieve 5 and 10-year revenues of $102.6 million and $111.2 million in the U.S. and $283.8 million and $296.7 million worldwide, respectively.

Telavancin (Theravance)
Telavancin is in phase III studies and we predict that the drug will gain FDA approval in early 2007 and obtain the most market share between the three glycopeptide drugs within our coverage. We project Telavancin to achieve 5 and 10-year revenues of $107.7 million and $103.8 million in the U.S and $169.7 and $238.8 million worldwide, respectively.

Oritavancin (InterMune)
Oritavancin is predicted to be approved in early 2008 and we project Oritavancin to achieve 5 and 10-year revenues of $115.3 million and $137.7 million in the U.S. Worldwide we project $169.5 million and $331.7 million, respectively.

Ceftobiprole (Basilea Pharmaceutica)
Ceftobiprole is expected to be FDA approved in early 2007 with projected U.S. revenues of $102.6 million and $96.4 million and worldwide revenues of $150.8 million and $253.0 million for 5 and 10-years, respectively.