Just the Boost Genentech Needs?
Shirley Bradford has suffered from psoriasis for two decades and knows only too well why the painful skin condition is called "the heartbreak disease." At times, her skin was so covered with scaly red lesions she was embarrassed to go to the grocery store. "It looked like I threw hot grease on my body," says Bradford, 54, a preschool teacher in Alpharetta, Ga. There was little Bradford could do, however: Virtually no treatment existed for such serious outbreaks. Then, two years ago, she enrolled in a trial of Genentech Inc.'s (DNA ) drug, Raptiva. With a once-weekly injection, her skin has been almost completely clear. "I don't worry about people looking at me anymore," she says. "It's just wonderful."
Genentech could certainly use the boost that Raptiva might provide. The South San Francisco biotech pioneer has been reeling from a string of clinical-trial disappointments related to its highly anticipated experimental cancer drug, Avastin. What's more, although Genentech's sales grew 23% last year, to $2.7 billion, its net profit fell 58%, to $63.8 million -- largely because of a breach-of-contract lawsuit by the City of Hope Cancer Center in Los Angeles.
The hospital sued Genentech for royalties on drugs the company developed using City of Hope's discoveries. Genentech lost the suit and recorded $543.9 million in litigation charges. The case is now under appeal. But jittery investors have pushed Genentech's stock down from $55 last spring to around $35 today. Genentech can recover from the setbacks and meet its goals, but only if Raptiva is a hit. "This is a key drug," says Matthew Gellar, an analyst at CIBC World Markets.
Genentech's recent woes aside, the news is bright for psoriasis patients. Raptiva is one of at least four drugs being developed for the ailment. And so far, Genentech's treatment is among the most promising. At a recent annual meeting of the American Academy of Dermatology (AAD) in San Francisco, Genentech announced that, after 12 weeks on Raptiva, 59% of patients enjoyed at least a 50% improvement in symptoms. In a separate study, 79% of patients who took the drug for more than 49 weeks had similar results. Some 31% of them cleared up almost completely. And while some patients have side effects such as headaches, chills, and fever, they're usually so mild that patients can stay on Raptiva indefinitely -- an advantage over most therapies now available. "Safety is what this brings to the table," says Dr. Kenneth Gordon, associate professor of medicine at Loyola University in Chicago who was involved in Raptiva trials.
The Food & Drug Administration could approve Raptiva by the end of this year. Then, Genentech would be free to market it to 1.5 million Americans with moderate to severe psoriasis. The drug blocks the underlying mechanism of this disease, which occurs when the immune system's T-cells become hyperactive and bind to blood vessels, causing itchy lesions to pop through the skin. Most topical creams don't help much, and ingested drugs can cause kidney or liver damage. No wonder studies have found that 10% of psoriasis patients contemplate suicide. In addition to the discomfort, "this disease causes profound humiliation," says Gail M. Zimmerman, CEO of the National Psoriasis Foundation, an advocacy group. "Patients are desperate."
If the new drugs deliver as billed, analysts believe the psoriasis market could soon be worth $1 billion a year. Genentech will need to grab a fat slice of that pie to meet the lofty goals it laid out at a Mar. 14 meeting for Wall Street analysts. The company declared it would expand sales from $2.7 billion last year to $4 billion by 2005 and produce double-digit annual profit growth, excluding special charges, through 2010.
Intense rivalry with other drugmakers, however, could make those goals difficult to achieve. Biogen Inc. (BGEN ) in Cambridge, Mass., got off to a running start in January, when the FDA approved its psoriasis drug, Amevive. Like Raptiva, it is taken once a week. But Amevive must be administered by a doctor, either by injection or intravenously, while patients can inject the Genentech drug themselves. And because Amevive kills T-cells -- rather than just calming them down as Raptiva does -- patients must have their blood tested every week to make sure that their T-cell counts don't decline too far. In addition, Raptiva kicks in faster, according to Genentech.
Other competitors may give Genentech fits later on. Psoriasis is an autoimmune disease similar to other conditions for which effective treatments already exist. Most notably, Amgen Inc.'s (AMGN ) rheumatoid arthritis drug, Enbrel, could get FDA clearance for psoriasis by the end of the year. In fact, Enbrel already won approval for an advanced form of psoriasis called psoriatic arthritis in January, 2002, giving it rising cachet among dermatologists. Industry data show that 1,300 dermatologists have prescribed Enbrel since January, when the company fixed a two-year supply shortfall. Dr. Hal Barron, Genentech's vice-president for medical affairs, admits: "Enbrel is the strongest competitor out there."
Abbott Laboratories (ABT ) and Johnson & Johnson (JNJ ) are also tackling psoriasis. At the AAD meeting, J&J presented data showing that its arthritis drug Remicade produced a 75% improvement in psoriasis symptoms for 72% of patients by week 10. At a higher dose, 88% of patients enjoyed a similar result.
All the contenders face high marketing hurdles. Many dermatologists have little or no experience with biotech drugs, made from living cells. They worry about exposing patients to long-term risks -- still largely unknown. Even Enbrel, which has a five-year safety track record, carries a warning that it might trigger tuberculosis and other infections. "We have to be cautious," says Dr. Francis J. Dann, assistant clinical professor at the University of California at Los Angeles. "We don't want to make patients sick with problems they didn't have before." Those risks could make it difficult for dermatologists to persuade insurance companies to pay for Raptiva and the other new treatments -- which could cost more than $12,000 per patient per year.
Genentech plans to calm the fears with an all-out marketing campaign aimed directly at dermatologists. And Barron says Genentech will keep tabs on Raptiva patients over the long haul, so the company can bolster the drug's reputation for safety.
Could Raptiva be the shot in the arm that Genentech needs? A big yellow billboard on the freeway near the company's headquarters sums up its high expectations. It says: "San Francisco 1976: Genentech founds biotechnology. San Francisco today: Genentech takes on psoriasis." The company and its customers can only hope Raptiva's performance lives up to its promise.
By Arlene Weintraub in South San Francisco