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Teva $1 Billion Market Depends on New Test of Laquinimod

Teva Pharmaceutical Industries Ltd. (TEVA) is recruiting about 1,800 patients for a new trial of its multiple sclerosis pill in a bid to improve how the disease is treated and secure a successor to its best-selling medicine.

The drug, laquinimod, is undergoing a third round of research with a new focus on slowing a patient’s descent into disability after failing to beat competing products on the industry standard of reducing the rates at which they experience relapses. Teva is testing the pill, shown to be safe in earlier trials, at a higher dose as it seeks to verify that the drug effectively delays loss of muscle control and balance.

“If this trial confirms that the drug can indeed reduce the progression of the disease, that would be very significant for people with MS,” said Timothy Coetzee, chief research officer at the National MS Society, who oversees the New York- based association’s $45 million research portfolio. “The last trials showed that something is definitely happening there, in terms of impact on the brain.”

The treatment would be important in helping Petach Tikva, Israel-based Teva make up for a loss in revenue from its Copaxone injection, which controls as much as 40 percent of the $10 billion MS market. The drug faces competition from newer pills such as Novartis AG (NOVN)’s Gilenya and Biogen Idec Inc. (BIIB)’s BG-12. Teva predicts Copaxone revenue, which accounted for 21 percent of sales in 2011, will peak at $3.8 billion this year.

Convincing Investors

Sales of the drug may fall to $1.44 billion in 2018, according to a July 31 report by EvaluatePharma Ltd. None of the company’s next four biggest sellers are forecast to reach $1 billion in annual revenue in that time, the report said.

Teva’s American depositary receipts fell 14 percent in May, the biggest monthly drop since September 2001, after it reported sales that missed analysts’ estimates and later cut forecast earnings for 2012. The U.S. shares, which rose 0.1 percent to $40.45 at 10:07 a.m. in New York, are almost unchanged this year and trail a 9 percent advance by the Bloomberg World Pharmaceuticals Index. (TEVA) Teva stock traded in Israel gained the most in two weeks today, adding 0.9 percent to 162.70 shekels at the close in Tel Aviv.

Teva is trying to convince investors that results for laquinimod this time will be different after earlier study outcomes sent the stock tumbling.

“Most of Wall Street has written off this drug,” Randall Stanicky, an analyst at Canaccord Genuity with a buy recommendation on Teva, said by phone from New York. “With BG-12 about to hit the market, and its data being so good, you have to ask yourself: How is this drug going to be positioned?”

New Goals

The new study, dubbed Concerto, may take as long as two years to complete, according to Teva. A successful outcome would enable a change in treatment goals for MS, which affects about 2.1 million people. Doctors now focus on a drug’s ability to reduce the frequency of relapses, marked by a temporary worsening or the appearance of new symptoms, such as loss of sight in one eye or wobbly sensations.

Multiple sclerosis causes the immune system to attack the insulating tissue around nerve fibers, slowly depriving patients of mobility, balance and coordination. Many MS patients have trouble sticking with injected or infused therapies because they’re difficult to use or have side effects, according to the National MS Society.

Laquinimod could achieve commercial success as drugs that also tackle the long-term progression of the disease into disability would increasingly garner doctors’ attention, according to Asthika Goonewardene, a Bloomberg Industries pharmaceutical analyst in London.

BG-12

Biogen said in October that BG-12 was safe and reduced the annual rate of relapse by 44 percent when taken twice daily, while Copaxone reduced the rate by 29 percent versus a placebo. In the most recent study of laquinimod, Bravo, the drug missed the main target of reducing annualized relapse rates, Teva said.

Prescribing laquinimod for patients may be difficult if the drug doesn’t help reduce relapses, said Aaron Miller, medical director of New York-based Mount Sinai School of Medicine’s multiple sclerosis center.

“Disability data is the most important, but if you put patients on a drug for long-term treatment and they start having relapses, one tends to throw in the towel,” Miller said in a phone interview. “My hope would be that the higher dose might improve the relapse data.”

Bravo, Allegro

In the Bravo trial and the earlier study, Allegro, laquinimod showed no extra incidence of side effects, infections or deaths versus a placebo, while it demonstrated significant reductions in both brain-volume loss and the risk of disability, according to Teva.

Laquinimod’s capacity to reduce the progression to disability and decelerate the loss of brain mass raises the prospect of combination therapy, National MS Society’s Coetzee said.

“The notion that you would combine a couple of agents is not far-fetched,” Coetzee said in a phone interview.

A spokesman for Teva declined to provide additional information on the Concerto trial, such as whether the company will explore laquinimod’s effectiveness when used together with another MS drug.

Laquinimod could be used as a treatment for relatively young patients who experience so-called clinically isolated syndrome, an initial inflammation of the central nervous system that sometimes deteriorates to MS, according to Ronny Gal, an analyst at Sanford C. Bernstein & Co. Gal also didn’t rule out the drug being prescribed in combination with other therapies.

$1 Billion Market

“Think about the 31-year-old woman who doesn’t want to immediately take a drug unless she knows it’s safe,” Gal said by phone from New York. “That could be a $1 billion market.” The trial has “high” odds of succeeding, he said.

Teva would also benefit should laquinimod be used for treating Crohn’s disease and lupus, Gal said. Those diseases, like MS, arise when the immune system mistakes some part of the body as a pathogen and attacks its own cells. The drug is in separate clinical studies for those conditions.

Teva and its partner on laquinimod, Active Biotech AB (ACTI), are seeking approval in Europe for the drug’s use as an MS treatment. Lund, Sweden-based Active said on July 17 that the European Medicines Agency completed the validation process for the pill’s marketing authorization application.

Analyst Upgrade

The U.S. Food and Drug Administration’s permission for a third advanced-stage trial and the European regulatory filing have raised confidence in the drug, analysts at Jefferies International Ltd., including Peter Welford in London, said in a note to clients on Aug. 10. Welford raised his 12-month target for Active’s share price to 50 kronor from 40 kronor.

Approval of laquinimod in the U.S. would be expected in the second half of 2016, assuming trial results come out a year earlier, Welford said. The drug has a 50 percent chance of commercial success and potential for $900 million in worldwide sales under conservative estimates, he said.

Active Biotech declined 0.6 percent to 49.7 kronor at 4:06 p.m. in Stockholm, paring the stock’s advance in the past 12 months to 64 percent.

A U.S. federal judge in New York handed Teva a ruling in June that may delay generic versions of Copaxone from entering the market until 2015. The victory may give Teva more time to switch patients to a new, higher-dosage version of the drug. Teva said June 14 that a late-stage trial of a longer-acting formulation reduced MS relapses more than a placebo.

To contact the reporter on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net

To contact the editor responsible for this story: Kristen Hallam at khallam@bloomberg.net

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