Arthritis Drug’s $1.4 Billion Promise for German Drugmaker Hinges on Study
4SC AG (VSC) said study results due by the end of next month may help the German biotechnology company secure a licensing deal for its experimental rheumatoid arthritis medicine, Vidofludimus.
4SC needs a partner to fund the last and most expensive round of human trials required for approval, Chief Executive Officer Ulrich Dauer said in an interview. A possible deal hinges on results from a mid-stage clinical trial that are expected by the end of June, Dauer said. He declined to say how many companies Martinsried, Germany-based 4SC is in talks with, saying the number is “more than two but less than 10.”
Vidofludimus would offer an oral, lower-priced alternative to injected therapies such as Enbrel from Pfizer Inc. and Amgen Inc. (AMGN) that dominate the $13 billion rheumatoid arthritis market, Dauer said. The drug, which is also being tested in inflammatory bowel disease, may bring in more than 1 billion euros ($1.4 billion) in peak sales when used in the two illnesses, said Edouard Aubery, an analyst at Equinet AG in Frankfurt.
“This is a very promising small molecule with blockbuster potential,” Aubery said in an interview. “This is a relatively cheap drug compared to the biologics like Enbrel.”
Vidofludimus is a so-called small molecule, a drug manufactured by chemical reactions in large vats, like most pills. The medicine works through two channels: It stops certain immune cells linked to the rheumatoid arthritis from multiplying, and dulls some cellular communication, calming the body’s immune reaction.
The drug also may be effective in additional immune-system disorders such as lupus, psoriasis, multiple sclerosis and transplant rejection, 4SC said.
4SC fell 5 cents, or 1.3 percent, to close at 3.52 euros yesterday in Frankfurt trading. The stock has gained 26 percent in the past year, giving the company a market value of 147.9 million euros.
While the size of the Vidofludimus deal will depend on the study results, two transactions involving compounds to treat rheumatoid arthritis stand out, Aubery said.
Eli Lilly & Co. (LLY) in 2009 bought worldwide rights to an experimental pill being developed by Incyte Corp. to treat inflammatory conditions, in a deal potentially worth more than $750 million. AstraZeneca Plc (AZN) bought rights to the R788 drug from Rigel Pharmaceuticals Inc. (RIGL) in 2010, in an agreement valued at as much as $1.25 billion.
Drugmakers are looking to license or acquire medicines at earlier stages of development as they seek to offset sales lost to generic competition, Mike Ward, editor of Scrip Intelligence, an analysis service for the pharmaceutical industry, said in a telephone interview.
“Pharma companies are desperate to fill the vacuum created by products going off patent,” Ward said. “All the late-stage assets have long been snapped up.”
Brand-name drugs with about $37 billion in sales will lose U.S. patent protection next year, according to Aaron Gal, an analyst with Sanford C. Bernstein in New York.
Larger companies are avoiding high upfront payments, to limit their losses should the drug fail in late-stage testing, according to Siegfried Bialojan, who heads Ernst & Young’s Life Science Center in Mannheim. Lilly paid Incyte $90 million initially, with as much as $665 million in payments possible if certain goals are met. AstraZeneca paid Rigel an initial $100 million, with another $1.15 billion in potential milestones.
‘Not a Marriage’
“They are looking for alliances that are a commitment, not a marriage,” Bialojan said.
Biotechnology companies are in a strong negotiating position if they can provide good clinical data, Hubert Birner, a partner with TVM Capital GmbH, a venture capital firm based in Munich, said in an interview.
“The pharma industry is very hungry for deals that can show the necessary clinical safety and efficacy,” Birner said.
Dauer co-founded 4SC in 1997 as a spinoff of his work at the University of Wuerzburg, where he was a chemist. The company uses computers to model the efficacy of experimental compounds for use in cancer and autoimmune diseases.
Vidofludimus is similar to Sanofi’s Arava, an older rheumatoid arthritis treatment that is expected to earn about 150 million euros this year. 4SC used computers to find a molecule lacking Arava’s severe side-effects, Dauer said.
Rheumatoid arthritis causes swelling and stiffness in the joints, as the body’s immune system mistakenly begins to attack the joint tissue. Doctors don’t know what causes the ailment, according to the U.S. National Institutes of Health in Bethesda, Maryland. About 1.3 million Americans had the condition in 2005, according to the Atlanta-based Centers for Disease Control and Prevention, another government agency.
According to Datamonitor, a London-based research firm, the three best-selling rheumatoid arthritis drugs are Enbrel from New York-based Pfizer and Thousand Oaks, California-based Amgen; Humira, from Abbott Park, Illinois-based Abbott Laboratories (ABT); and Remicade, sold by New Brunswick, New Jersey-based Johnson & Johnson and Merck & Co. of Whitehouse Station, New Jersey.
The shots are standard care for the 80 percent of patients who don’t respond to treatment with methotrexate, a generic drug that can block cell growth in people with certain cancers and immune disorders. All are based on proteins or monoclonal antibodies, compounds produced to closely resemble molecules found in the human immune system. Companies use genetically engineered cells to make the treatments.
4SC is planning to position Vidofludimus as an alternative to the expensive injected therapies, Dauer said, pricing it between methotrexate and the biologics. These treatments cost as much as $20,000 a year and leave patients susceptible to infections. Methotrextate costs about $1,000 annually.
“This is a gigantic indication, it can be done if the drug is positioned well,” Dauer said.
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