Glaxo's Aids Ammo
In 1988, when Gregory K. Fauth learned he was infected with the AIDS virus, he thought he had been handed a death sentence. The former Navy technician began taking Wellcome's AZT, the only approved AIDS drug at the time. Now, eight years later, he's taking Glaxo Wellcome PLC's Epivir and Merck & Co.'s Crixivan as well. By following a costly, long-term regimen of "combination therapy," Fauth has managed to wipe out all signs of the virus in his blood. Says the 41-year-old New Yorker, who swallows 20 pills a day: "I'm winning the battle."
Fauth is one of a growing number of patients benefitting from rapid advances in AIDS treatment. And London-based Glaxo Wellcome plays a major role in supplying the drugs Fauth and hundreds of thousands need to turn AIDS from a fatal disease into a chronic affliction. With its $14 billion takeover of Wellcome last year, Glaxo moved from a position of having no AIDS drugs on the market to dominating the field. As a result, Glaxo is expected to control more than 50% of the world's $1.3 billion AIDS market this year. And demand for AIDS drugs could triple by 2000. "Glaxo is head and shoulders above the competition in the AIDS field," says Barrie James, president of Basel-based Pharma Strategy Consulting and a former Merck executive. Glaxo's shares are trading near $16, close to their 52-week high.
SECOND WIND. Glaxo's dominance at first appears surprising. The company is not marketing any protease inhibitors, the new AIDS drugs whose remarkable powers are generating headlines. And Wellcome's AZT looked like a loser product three years ago, after well-publicized trials questioned its effectiveness.
But new clinical data show that AZT and Epivir are essential ingredients in the "cocktail" therapies that also involve protease inhibitors. From sales that had stalled at $300 million a year since 1992, AZT revenues should jump 27% this year, to some $400 million. "As a single agent, there probably wasn't a lot of future for that drug," says Glaxo Chairman Sir Richard B. Sykes, a former research scientist. "But in combination with Epivir, it has come back to life." As for Epivir, its sales are expected to reach $260 million, from $12 million last year. And Glaxo's half-year pretax profits, at $2.4 billion on sales of $6.5 billion, topped analysts' estimates.
With billions of dollars at stake, Glaxo is working on all cylinders to expand this powerful franchise. The global rollout of Epivir, licensed from the Canadian company BioChem Pharma Inc., is nearly complete. Glaxo also hopes to launch its own, improved protease inhibitor, known as VX-478, and a new drug that blocks the same enzyme as AZT. To market these expensive therapies, whose wholesale prices can exceed $6,000 a year per patient, the British drug giant is preparing detailed economic studies to convince drug purchasers, such as hospitals and government health agencies, that the cocktails are worth the money. It's also working closely with AIDS activists, who forced Wellcome to slash the price of AZT amidst charges of profiteering.
Both of Glaxo's products work by inhibiting an enzyme called reverse transcriptase that enables HIV to replicate. But newer drugs, such as Merck's Crixivan, Abbott Laboratories' Norvir, and Roche Holdings' Invirase, act by blocking another enzyme, called protease, that also helps the virus spread. Clinical trials show that combining these two types of drugs can reduce the amount of virus in patients' blood to undetectable levels. No wonder, then, that sales of protease inhibitors have zoomed to more than $300 million this year.
By encouraging more people infected with the virus to seek treatment, the makers of the new protease inhibitors have expanded the overall market--to Glaxo's benefit. That's important for Glaxo. Zantac, its $3 billion blockbuster ulcer drug, loses patent protection in some countries next year, so the company is hungry for new sources of growth (chart). Although AIDS drugs will probably account for only 5% of Glaxo's 1996 sales, they should generate 12% of revenues by 2000, predicts Stewart Adkins, a Lehman Brothers Inc. drug analyst in London. If the new products click, Glaxo is expected to have 56% of the global AIDS market by decade's end.
Still, Glaxo is way behind in rolling out its own protease inhibitor. From Wellcome, it inherited a licensing deal with Vertex Pharmaceuticals Inc. in Cambridge, Mass., for the VX-478 compound, developed by Dr. Roger Tung. If it has all three ingredients for the cocktail, Glaxo can bundle them together and offer purchasers lower prices. What's more, some analysts believe VX-478 has fewer side effects and greater potency than the current crop, so that its sales could reach $360 million by the turn of the century.
Development of the Vertex drug has been slowed by a patent fight with G.D. Searle. That has been settled, but VX-478 won't hit the market until 1998. Well before that, Roche hopes to get approval for an improved version of Invirase, which it is testing in combination with Abbott's Norvir as a protease-protease cocktail. AZT is also vulnerable to competition. Roche and Bristol-Myers Squibb introduced rival reverse transcriptase inhibitors several years ago. Because they are more toxic and less potent than AZT, they are mainly used as a backup if patients cannot tolerate the Glaxo drug. Even so, Glaxo is rushing to come out with another compound in that same class known as GLX 1592.
EXPENSIVE OPTIONS. Another challenge is setting the right policy for pricing. Glaxo must convince private insurers and government agencies that the high cost of combination therapy is a better value than paying the $18,700 a year it usually takes to treat someone with full-blown AIDS. And it has to profit from its AIDS effort while avoiding the negative publicity that battered Wellcome. "Our customers are no longer prepared to take on a new technology at any price," explains Jeremy V.M. Chancellor, director of health economics for Glaxo Wellcome U.K.
That's for sure. At Britain's Kingston Hospital Trust, which houses a publicly funded clinic that treats AIDS patients, demand for combination therapy is expected to raise the clinic's costs by 20% this year and 50% next year--possibly threatening its survival, says Martin Weaver, a local government AIDS coordinator. In another sign of resistance, the Canadian province of Quebec earlier this year refused to offer blanket coverage for Epivir therapy. But then, an AIDS activist staged a hunger strike. The province backed down, ostensibly because new data convinced it that Epivir worked.
A crucial element of Glaxo's strategy has been to reach out to such AIDS activists. Building on Wellcome programs, it set up "community consultancies" in the U.S. and Europe, keeping AIDS activists informed of developments and inviting them to help coordinate clinical trials. "Few other pharmaceutical companies have given us this level of access," says Robin Gorna, a director of the Terrence Higgins Trust, a British AIDS group. "When Glaxo bought Wellcome, it bought its history of bad relations with the community. It had to do something."
So far, so good. Now, Glaxo has to keep improving its arsenal of drugs against the scourge of the age.