Spreading agents are used to disperse drugs or fluids in the tissue just below the skin (subcutaneous) to improve their uptake or removal by the body. The market consists of forms of hyaluronidase, a group of naturally occurring enzymes that break down hyaluronic acid. Hyaluronic acid forms the ground substance between cells in subcutaneous tissue. The major use of hyaluronidase as a spreading agent has been in ophthalmologic surgeries, particularly for cataracts, in order to improve the function of injected anesthesia. Other uses have been to improve the absorption of fluids or medications given subcutaneously in hospice or nursing home patients, as well as to treat certain extravasation injuries from medications that leak into the subcutaneous tissue by a failed intravenous line.

While originally approved years ago, the sole hyaluronidase available in the US in 2000 (Wydase, made by Wyeth but now owned by Baxter) was taken off the market due to manufacturing problems. Three other animal-derived products have been approved, beginning in 2004, but sales to date have been limited. The market leader is Amphadase (Amphastar), made from cattle, followed by Vitrase (Ista – ISTA), derived from sheep. Another cattle product, Hydase (Primapharm), was approved in October 2005. Compounding pharmacies also became a more significant source of the drug when Wydase was discontinued.

A recombinant form of hyaluronidase, Hylenex (Halozyme – HTI and Baxter – BAX), was approved in the US in December 2005, and should be launched soon. It likely has a lower risk of allergic reactions than the animal products (the risk of the latter is less than 1:1000 patients), and avoids the theoretical risk of transferring animal pathogens such as the agent causing mad cow disease (per its prescribing information, Hylenex uses human serum albumin as a stabilizer: while some may perceive a theoretical risk of transmission of human pathogens from this human-derived product, it has a strong safety record).

While we think that Hylenex will take a healthy share in some of the indications for hyaluronidase, overall, we feel the market opportunities are quite limited. For cataract surgeries, there has been a trend away from injected anesthetics towards topical ones. When injected anesthetics are used, however, we think Hylenex will be a frequent choice, but its share will limited by cost (since many cases are paid by Medicare with a fixed fee for the entire procedure) and the lesser risk of an allergic reaction when the product is only used once and not on an ongoing basis. Since intravenous extravasation injuries also do not generally involve repetitive use of hyaluronidase, we think there is similarly a less compelling argument for the use of Hylenex.

While Halozyme is targeting the potentially larger hospice market, where Hylenex could be given multiple times to a patient for the subcutaneous infusion of fluids or medications, the economics of this market and certain trends make it unlikely that Hylenex will see widespread use. There has been a trend away from artificial hydration in hospice care. And since fluids and medications can usually be given subcutaneously at low flow rates without hyaluronidase, we think cost pressures will force most providers to avoid adding Hylenex. There are similar cost issues working against its use in nursing homes. Use could be increased if a pharmacoeconomic study were to show that Hylenex is cost effective, but we do not currently foresee a compelling argument for this. Finally, while the subcutaneous infusion of fluids is used to a greater extent in some countries other than the US, we think there will be similar cost pressures against Hylenex, particularly since competing animal products may be priced even lower than in the US.

CLINICAL USES OF HYALURONIDASE

Ophthalmologic Surgery

Hyaluronidase is used to facilitate injected anesthesia, particularly in cataract surgery, where it has been widely used since 1986. Though the evidence is mixed, hyaluronidase is thought to hasten the action of anesthesia in paralyzing eye movements and also mitigate the increase in intra-eye pressure that can be seen after nerve blocks (injecting an anesthesia near a nerve) used in cataract surgery. In addition, case studies have suggested there is a higher rate of double vision when hyaluronidase is not used, due to the effects of inadvertently injecting anesthesia into an eye muscle. Hyaluronidase is also used in less common eye surgeries.

There were 2.79 million cataract surgeries performed in 2005. However, an increasing number of surgeons have been using topical rather than injected anesthesia, and hyaluronidase is not needed with topical anesthesia. According to a survey by the American Society of Cataract and Refractive Surgery (ASCRS), 37% of cataract surgeons used injected anesthesia in 2003, compared to 70% in 1995. The physicians using topical anesthesia tended to be those doing more procedures.

Hyaluronidase is also used on surgery for the upper eyelids (to correct drooping) so that anesthesia does not need to be injected as deeply. However, there are mixed views on its use, with some physicians recommending it routinely and others avoiding it, because they believe it increases the likelihood of anesthetic spreading to the muscle that lifts the eye (making surgery more difficult). According to the American Society for Aesthetic Plastic Surgery, there were 231,467 blepharoplasty procedures performed in 2004 (these include upper and lower eyelid procedures).

Continuous Subcutaneous Infusion

Continuous subcutaneous infusion (CSI) can be used instead of the intravenous route to give certain medications or fluids (the latter is called hypodermoclysis). Subcutaneous infusions are used in patients who cannot take oral medications/fluids and where medications given by the sublingual, transdermal, or rectal route are not adequate. Though the volume of fluids that can be given is less than with an intravenous line, the subcutaneous route has less risk of serious infections and can be more readily monitored at home by a patient’s family.

The primary use for CSI is in terminally ill patients. In a US survey published in 2001, 73% of hospices reported that they used CSI, though most use was for administering pain medications (only 8% reported using it to treat dehydration, which requires fluids). However, while there is regional variability in hospice practice, CSI for medications has been used less than in the past, with preference for the sublingual or transdermal route, though this may be changing again as some practitioners realize the limitations of these latter routes of administration. Also, there has been a strong trend away from artificial hydration, such as fluid infusions (a 2003 position paper from the Hospice and Palliative Nurses Association noted that though the data are limited, the evidence suggests that artificial hydration does not benefit dying patients). As a result, hypodermoclysis is used quite infrequently in the US. Patients in inpatient units (approximately 18% of current hospice patients) are more likely to undergo infusions, but this may also be via the intravenous route, since nursing staff are more readily available.

Hypodermoclysis has also been used in nursing homes, where patients may need extra short term hydration due to an acute illness or flare of their chronic conditions. However, use in this setting is also quite limited. One survey found only 6% of nursing homes using the technique. One factor mitigating against its use is that patients who require fluids on a more regular basis would also likely need nutrition, requiring a feeding tube or intravenous line. Also, nursing homes are graded on quality measures such as the encouragement of oral intake. Nevertheless, while such quality measures may lower the need for hypodermoclysis, we think they also point to a possible role for the procedure in cases where patients have short term illnesses and cannot take enough fluids orally (for example, a quality guide from one state’s Department of Aging lists hypodermoclysis as an alternative treatment if oral intake is inadequate).

While data are limited, there is anecdotal evidence that use of CSI is higher in Europe. This varies by country, however. A survey of a Swiss geriatric unit reported frequent use, with 54% of providers using the subcutaneous route for dehydrated patients and 83% using it for palliative care. On the other hand, a 2000 study from an Italian inpatient hospice reported no use of hypodermoclysis since the late 1980s and CSI of opioids in only 8% of patients, down from 16% in the early 1990s, partly due to the use of transdermal fentanyl. Finally, a British hospice estimated CSI of medications in 33% of patients (a reduction from the past likewise due to transdermal options) and uncommon use of hypodermoclysis.

While older reports in the literature recommended using hyaluronidase with subcutaneous infusions, more recent reviews are mixed. Some authors note that hyaluronidase can be used to improve delivery with the subcutaneous route, but others note increased adverse effects or no benefit for patient comfort. Most recent reviews cite that hyaluronidase is not really needed for either medication or fluid delivery, unless they must be given at high flow rates, which is uncommon. One review, for example, cited that use of hydromorphone instead of morphine, allows lower flow rates without the need for hyaluronidase. For fluid infusions, a commonly cited guideline is that hyaluronidase is not needed for rates below 125 mL/hour. A report from one center noted hyaluronidase was only required in 8% of patients receiving hypodermoclysis, and they only used the medication when patient discomfort or problems with absorption made it necessary.

A potential issue affecting hyaluronidase use is that until recently, hyaluronidase products have been animal-derived, which can lead to allergic reactions, particularly for repeat usage. The recent introduction of a recombinant product (see below) should make this less of a factor. Finally, as noted by a US hospice physician who uses CSI for medications relatively frequently, a major factor for the infrequent use of hyaluronidase in palliative care is the lack of definitive studies showing a benefit for the drug.

Extravasation Injuries

Hyaluronidase is also used to reduce tissue damage by helping to spread (and reduce the concentration of) dangerous drugs and fluids leaked into the subcutaneous tissue by a failed intravenous line (extravasation). The use of hyaluronidase in this setting has not been tested in controlled studies, but has been used on the basis of case reports and series. Successful use has been reported in extravasations of dextrose, parenteral nutrition solutions, calcium solutions, potassium solutions, aminophylline, nafcillin and radiocontrast media. In oncology, hyaluronidase is recommended for extravasation of vinca alkaloids and taxanes.

Hyaluronidase is particularly used in treating neonatal extravasation injuries, since neonates cannot communicate pain and hence have an increased risk of severe injury. However, there are wide discrepancies in its use, with some neonatal care units using it frequently and others not using it at all.

Other

The prescribing information for hyaluronidase products also lists subcutaneous urography, but this is an outdated procedure. A different formulation of hyaluronidase is also used in the process of in vitro fertilization. There are a couple plastic surgery studies showing that hyaluronidase can be used to reduce the size of augmentation from injected Restylane, a hyaluronic gel used to fill facial wrinkles. The extent of off-label use for this is unclear.

CURRENT PRODUCTS

Wydase, made from cattle, was the only available US product in the late 1990’s. It was marketed by Wyeth, but discontinued in 2001 due to manufacturing problems. Baxter acquired the drug for Wydase in January 2003, but it was never returned to the market. Two additional products were approved in the US in 2004: Vitrase (Ista – ISTA), derived from sheep, and Amphadase (Amphastar), made from cattle. Amphadase, which is less expensive, has approximately twice the sales of Vitrase. Another cattle product, Hydase (Primapharm), was approved in October 2005. Hyaluronidase has also been made by some compounding pharmacies, due to the shortage when Wydase was discontinued.

A recombinant product, Hylenex (Halozyme – HTI and Baxter – BAX) was approved in the US in December 2005, and should be launched soon. Since it is not an animal product, Hylenex should have a lower rate of allergic reactions. In addition, it avoids the potential transfer of infectious agents, such as the agent causing mad cow disease, which could theoretically be transferred from a cattle-derived source. On the other hand, Hylenex uses human albumin as a stabilizer, and while this product has an exceptional safety record, there is a theoretical risk of transferring human pathogens.

There has been limited study of Hylenex or the other new products: approval of these agents was expedited because there were no approved hyaluronidases on the market and was primarily made on the demonstration of enzymatic equivalence (based on DESI standards for older drugs).

One study of Hylenex for use in hypodermoclysis has been performed. In a short-term double-blind randomized controlled study of 54 volunteers, Hylenex significantly improved the flow rate of subcutaneously delivered fluids, from 118 mL/hr to 464 mL/hr, with a lower incidence of moderate to severe edema (17% versus 94%). Patients in the Hylenex group had less pain, though levels were low in both groups and the difference may not be clinically meaningful. A study on using Hylenex for the infusion of the pain medication morphine was instituted this year.

European brands of hyaluronidase include Hyalase (Great Britain, Wockhardt UK), Hylase Dessau (Germany, Riemser), Hyason (Netherlands, Organon), and Jaluran (Italy, Pfizer).

DRUGS IN DEVELOPMENT

Vitrase for Vitreous Hemorrhage and Diabetic Retinopathy - Ista (ISTA) and Allergan (AGN)

(While these indications are different from use as a spreading agent, we include them here for completeness. Allergan has a share of Vitrase revenues for these indications, but not for use as a spreading agent.)

Vitrase received an approvable letter in 2003 for helping to clear vitreous hemorrhage (bleeding into the inner eye), and subsequently conducted a second phase III trial. While Vitrase has shown improvement in hemorrhage density, allowing the investigator to see the back of the eye, the studies did not meet the FDA required endpoint of best-corrected visual acuity, except for the first two months after injection. The company believes the reason is that the saline placebo begins to have an effect; however, they are at an impasse with the FDA with no resolution in sight. They have intended to publish data, in hopes of spurring physician use and getting Medicare reimbursement even without approval. In January, the company announced that the EMEA accepted for review the Vitrase application for vitreous hemorrhage. A decision is expected in the first half of 2007. (The application is only for vitreous hemorrhage, not as a spreading agent.)

Vitrase is also in Phase II development for diabetic retinopathy. The rationale is that Vitrase injected into the eye would separate the vitreous humor (the clear material between the lens and the back of the eye) from the retina (the lining at the back of the eye). The company believes this would help in early diabetic retinopathy, where the blood vessels of the retina leak fluid and small amounts of blood into the eye. They are in the process of doing additional pilot studies in this area, to help discussions with the FDA over what suitable endpoints are.

Finally, the company is also funding an investigator initiated pilot study for Vitrase to treat eye floaters.

REVENUE MODELS

Hylenex – Halozyme (HTI) and Baxter (BAX)

The main advantage of Hylenex is that as a recombinant product, there is less risk for an allergic reaction or transferring potential animal pathogens. On the other hand, the risk of an allergic reaction for single uses of the animal product, such as during surgery, are quite low. Also, since Hylenex uses human albumin as a stabilizer, there is a theoretical risk of transferring human pathogens. This may concern some physicians, although human albumin has been safely used for years in a variety of products.

A major factor in Hylenex usage is likely to be pricing. The majority payor in cataract surgery and in hospice care is Medicare, which uses a fixed reimbursement rate per procedure or hospice day. Hence extra costs are born by the provider. Pricing is also a major issue in nursing home care, where Medicaid is the most common payor. While some states reimburse additional amounts for drugs, there are generally strong cost control measures. We think Hylenex will be priced at a premium, but this will be limited to twice the price of the animal products. (Of note, there is a May 12, 2006 Centers for Medicare and Medicaid Services [CMS] meeting to decide whether to give Hylenex a HCPCS billing code different from the animal-derived products. A CMS working group has preliminary suggested that a new code be given, since the product is manufactured in a different way and has unique benefits. (However, unless Medicare makes an exception, this does not mean that Hylenex usage will be reimbursed in services paid by fixed rates per procedure or patient.)

In the ophthalmologic procedures market, due to its advantages as a recombinant product, we think Hylenex will take a healthy share of 40% of hyaluronidase use. However, the market is not large, and we think its share will be limited by cost considerations combined with the lower concerns of an allergic reaction with one time use of competing animal products. We project 5 and 10-year US revenues of $13.8 and $ 10.4 million, with corresponding worldwide revenues of $16.5 and $18.2 million.

For continuous infusions of medications and fluids, we think there will be severe cost pressures that will limit Hylenex usage, since it must be given on a repeat basis for longer term use. Medicare pays for over 70% of hospice patients (fewer than 10% of hospice patients have private insurance as the payor), and the average daily fixed rates are $126/day for home care and $563/day for general inpatient care. So if 1 or more vials of Hylenex are required per day, longer term use could substantially erode hospice profits. We think Hylenex will be preferred over animal products due to concerns over an allergic reaction with repeat use, but providers will likely opt to use lower flow rates where Hylenex is not as needed, and only use Hylenex sporadically. Due to these cost pressures, we do not see major use of the product. And while there may be greater use of these infusion procedures in Europe and Canada than in the US, there will also be substantial cost pressures in those countries (also, alternate hyaluronidase products appear to be priced much lower in Europe). We are projecting 5 and 10-year US revenues for CSI (hospice and nursing home) of $4.4 and $3.4 million, with worldwide revenues of $6.7 and $9.4 million. There is potential upside if pharmacoeconomic studies can show a cost-benefit for the use of Hylenex, such as due to lower complication rates than intravenous therapy.

Finally, for extravasation injuries from intravenous fluids, we think Hylenex will take a healthy share, but since these generally do not require repetitive infusions, there will be strong competition from the cheaper animal-derived products. We project 5 and 10-year US revenues of $3.2 and $2.2 million, and corresponding worldwide revenues of $3.8 and $3.8 million.

Overall, we are not optimistic over the market potential for Hylenex as a spreading agent, with projected total 5 and 10-year US revenues of $21.3 and $15.9 million, and corresponding worldwide revenues of $27.1 and $31.3 million.

Vitrase - Ista (ISTA) and Allergan (AGN)

Vitrase saw disappointing revenues of $2.4 million in 2005. Ista’s focus has been on the ophthalmologic market. While some of the low revenue is due to the fact that Wydase was off the market for a few years, so eye surgeons have found substitute ways of doing the procedure (or have been using hyaluronidase from compounding pharmacies), Amphadase has higher sales (twice as high per Ista) due to its lower price as a generic hyaluronidase. We think Hylenex will take some of Vitrase’s share once on the market. We do not foresee much use of Vitrase in continuous subcutaneous infusions or in extravasation injuries, where either Hylenex or lower price animal-derived products will be preferred. Ista is not actively pursuing these markets.

Our 5 and 10-year US projections for Vitrase as a spreading agent (used in ophthalmologic surgeries) are $3.4 and $2.3 million.

We have not modeled the other ophthalmologic indications that Vitrase is being tested in. As noted above, Ista is at an impasse with the FDA for vitreous hemorrhage, though there may be some off-label use. As for diabetic retinopathy, there is no trial data yet.