Caveat: This is a very small market where these companies can hardly recover the development costs. I think investors need to understand that.
What is HoFH?
HoFH or homozygous familial hypercholesterolaemia is a rare genetic condition marked by high cholesterol, particularly LDL, as the body is unable to remove LDL from the body, resulting in early cardiovascular disease. The most common issue with HoFH is occurrence in a much younger age than otherwise expected in the general population.
Isis’ Kynamro for HoFH
Kynamro (mipmersen sodium) is an inhibitor of apolipoprotein B. Apolipoproteins are proteins that bind lipids to form lipoproteins. Kynamro has been approved as a subcutaneous injection (once weekly) to be given along with medication for lowering lipids and diet to reduce LDl, apolipoprotein B and total cholesterol in HoFH patients.
Launched in partnership with Sanofi, Kynamro carries a warning that it may cause liver toxicity. Kynamro is yet to be approved by the EMA but stands a good chance if the risk of liver toxicity is mitigated.
Aegerion’s Juxtapid
Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)’s Juxtapid (lomitapide) is a selective inhibitor of a protein which increases LDL levels in HoFH patients. After FDA, the EMA also approved it for sale in Europe where it is marketed as Lojuxta. The drug is available only through a restricted program under JUXTAPID REMS.
Juxtapid is the company’s only marketed product and as of today, according to their website, the company is engaged ONLY in the development activities related to marketing approval of lomitapide in Japan and its clinical study for non-adult patients. It reported revenue of $1.23 million for the first time for the quarter ended March 30, 2013.
What about Isis?
Engaged in discovery of drugs based on its antisense drug discovery platform, ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) follows a royalty-based business model. After initial discovery, the company finds a partner from whom it receives royalty once the drug is marketed. Besides some smaller companies like OncoGenex, its partners include Sanofi (for Kynamro), Pfizer, AstraZeneca, Biogen Idec and Teva. The company reported Q1 FY 2013 revenue of $43.36 million and a loss of $1.67 million.
ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS)’s experience with the antisense technology has been much more pleasant than for Gilead Sciences, Inc. (NASDAQ:GILD). Gilead Sciences, Inc. (NASDAQ:GILD), formed in 1989, gave up on the antisense technology after a few years and sold the patents it did not need to ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS). Gilead Sciences, Inc. (NASDAQ:GILD) is now valued at $93 billion and reported annual revenue of nearly $1 billion for FY 2012. For the most recent quarter, ended March 31, 2013, the company reported an 8% increase in product sales ($2.39 billion) and net income of $722.19 million on revenue of $2.53 billion.
ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) has a number of drugs under study and recently reported encouraging results for ISIS-APOCIII, which was tested on patients taking another medication for high to critically high triglycerides in blood. Data from mid-stage trials demonstrated reduction of triglycerides by 64% and ApoC III associated very low density lipoprotein (VLDL) particles by 77% at the same time increasing good cholesterol (HDL) by up to 52%.
The takeaway
The current situation in the market is that shares of biopharmaceuticals surge to astronomical levels simply on the basis of positive results of clinical trials and/or FDA approvals.
The market values Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) at $2.2 billion and ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS) at $3.02 billion. While Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) is being valued simply on the basis of one drug, albeit a high priced one, Kynamro comprises of roughly 50% of Isis’ valuation based on future revenue estimates. Juxtapid is priced at $295,000 and Kynamro at $176,000.
What is being relegated to the background is the fact that HoFH is considered to be a one-in-a-million disease and the two companies must compete for market share from among a small pool of patients. According to rough estimates, there are about 400 HoFH patients in the US, which puts the size of the market between $70 million and $78 million, which both companies would be sharing.
Investors also need to be aware of the staggering cost of inventing new drugs, which could be anything between $4 billion to $11 billion for major pharmaceutical companies. No one knows this better than Isis as it spent approximately $2 billion since 1989 when it was founded and could get only one drug approved for an AIDS related virus, which did not sell. While Isis had $372 million in cash and cash equivalents as on March 31, 2013, Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR) had only $140 million, which seems insufficient considering the poor state of their income statements.
The positive side is that when it really comes down to it, there is a chance that orphan drugs may end up finding more patients than expected, the way Soliris of Alexion Pharmaceuticals did, and Genzyme (now part of Isis’ partner Sanofi) before that.
Unlike Aegerion, Isis is at a slight advantage due to its pipeline products but all its candidates are in early or mid development stage.
Investors wanting to invest should be aware that the risk/reward is unfavorable. Everything depends upon the number of patients. That number, at present, is small.
The article Two Drugs Competing for an One-In-A-Million Disease originally appeared on Fool.com and is written by Kanak Kanti.
Dr. Kanak Kanti De has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences. Kanak is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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