Rod Raynovich Final for GEN 9/2/2008
The Geriatric Bubble-By 2050 about 13 Million Americans will be affected by AD
You have heard enough about the surge of aging baby boomers and the impending disastrous financial impact caused by an explosive growth in government entitlements.
Medicare and Medicaid costs were $627 B last year and the Congressional Budget Office says that costs will double in ten years. Now add the epidemic proportions of a tripling of individuals with dementia or some form of Alzheimer’s Disease (AD). There are currently about 5 million people in the U.S. living with AD. One forecast by the Lewin Group in 2004 estimates Medicare spending for AD as much as $189B by 2015. About $5B dollars is currently being spent each year Worldwide on drugs that treat AD but these therapies do not cure AD just alleviate symptoms. The current economic burden of AD for patient care in the U.S. is about $100B. Worldwide more than 100 million people suffer from diseases of the brain characterized by loss of neurons.
There is also a lot of new information on risk factors and how interventions in life style such as diet, exercise and intellectual stimulation can slow down the disease process. Scientists do not fully understand the cause of AD but recently there has been a step-up in R&D and there is a growing clinical pipeline of new drugs. Diagnostic tests particularly biomarkers are at an early stage but are urgently needed to show the effectiveness of drugs in development.
Current R&D strategies
AD research has accelerated with advances in molecular and cellular biology, imaging, and genetic analysis. On a basic biological level we know that as AD begins, neurons become damaged and this process spreads to the brain resulting in some mental impairment and disease. The primary pathological signature for AD is plaques in the brain and much of the current research is directed toward eliminating or slowing down these amyloid deposits. Clinical investigators have pursued research in many core areas that may lead to breakthroughs.
There are currently over 300 clinical studies underway or being initiated for the diagnosis and treatment of AD so an avalanche of clinical data is expected over the next five years.
The prevailing scientific opinion is that Beta-amyloid (Ab) is the key culprit behind development of AD because of the toxic effects these Ab plaques have on neuron communication. Neuroscientists believe that Ab reduces signal transmission across synapses thereby altering neural activity and impairing behavior and memory. Thus one approach to treating AD is to block cellular pathways involving Ab. However there is still a minority of scientific opinion that believes that amyloid is a symptom not a cause of AD. The gold standard for assessment of AD is still the ADAS-cog test as the endpoint and measure of cognition for Phase 3 Alzheimer’s drug trials.
NFT’s and Tau
Also found within the brain of a person with AD are neurofibrillary tangles (NFT’s) which are found inside the neurons and consist of abnormal collections of a protein called tau. In AD tau has an abnormally high number of phosphate molecules eventually clumping together, forming NFT’s resulting in a collapse of the neuron transport system.
Tau studies are an active area for AD research with the hope that the damaging effects can be turned on and off.
New Diagnostic Tests-Genetic Risk and Imaging
One risk factor for late stage AD is the version of the APOE gene alleles they carry with enter site ApoE4 being one risk factor and that those that carry the ApoE2 version may have decreased risk because they overexpress the protein ABCA1. Increasing the function of ABCA1 might be an approach to reducing amyloid deposition. At the present time however genetic testing for the APOE gene and individual risk is not recommended.
The only definitive testing, assuming the patient has symptoms according to clinical criteria, is a thorough medical evaluation combined with brain imaging to confirm amyloid plaques. http://araliasystems.com/register/ FDG-PET is becoming a useful tool in conjunction with clinical information to more accurately diagnose AD.
PET scans have been used over the past few years to assess AD risk by identifying amyloid deposits. Recently at the University of Pittsburgh a radioactive dye called follow url PIB (licensed to G-E HealthCare) has made it possible to use PET scans for earlier assessment of risk. PIB can also be used for monitoring the effects of treatment.
Another PET imaging agent, FDDNP developed at UCLA and licensed to Siemens should also be in the clinic soon for detection of amyloid plaques. Neuroptix based in Acton, MA, has laser eye scanning technology under pre-clinical investigation that can detect amyloid in the eye which could be a precursor of deposits in the brain.
Current therapeutic products and pipeline
Glutamate-A powerful neurotransmitter
Glutamate is a key neurotransmitter involved in brain circuitry affecting memory and learning and is a target for drug discovery and how it can be implicated not only for AD but other neurodegenerative diseases such as schizophrenia and depression.
Memantine is currently approved for AD and appears to work on a blocking effect on the glutamate pathway (NMDA receptor modulator) but also boosts the acetycholine (AChEI’s) pathway. Recent studies have shown the drug to be beneficial based on cognitive tests and feedback from caregivers. Memantine (also known as Namenda, Axura, and Ebixa) is thought to have advantages over more established AD drugs such as Aricept and Exelon (rivastigamine) that boost acetylcholine related signaling but more clinical studies need to be done. The current U.S Market for all these products is ~$2.5B and growing at >10 % per year. The Global Market is should reach $5B within a few years. Pharmaceutical audit data from Wolters Kluwer shows 2007 sales of $1.4B for Aricept, $705M for Namenda and $191M for Exelon.
According to a 2007 Decision Resources report this AChEI market is expected to eventually slow or decline as generics take over due to patent expiration, and new generation products hit the market. However this may take a few years. Frost and Sullivan forecasts the U.S. market to grow to about $4B by 2010 then briefly decline followed by renewed growth as disease modifying drugs are introduced in 2011. A MedaCorp and Leerink Swann &Co. White Paper states, “Treatment that could delay the onset of Alzheimer’s Disease could reduce the number of patients by 50%, thus saving $50B in annual healthcare costs.”
Elan Corp. (ELN)
Elan has a broad pipeline of products in clinical development for AD in Phases I through III. Immunotherapies consist of two humanized monoclonal antibodies (bapineuzumab) which are engineered to clear the neurotoxic beta-amyloid peptide that accumulates in the brains of patients with AD. Bapineuzumab is in a pivotal Phase 3 trial and has developed a new cognitive function endpoint called NTB (Neuropsychological Test Battery) instead of using the ADAS-cog gold standard. Decision Resources projects that this agent will launch by 2011 with blockbuster potential of $5B by maturity if there are no safety issues. Elan is also developing beta and gamma secretase inhibitors with a product in Phase II in a partnership with Lilly. These enzyme inhibitors clip the amyloid precursor protein (APP) thus preventing the formation of amyloid plaques. Bill Tanner of Leerink Swann has an outperform rating on ELN. CSFB has also added Elan to its outperform list.
EPIX Pharmaceutical (EPIX)
Epix has a selective small molecule agonist of a specific GPCR (G-Protein Coupled Receptors) known as 5HT-4 in a Phase 2a trial as a single agent and in combination with Pfizer’s Aricept. Preliminary Phase 1b results showed the drug to be safe and well tolerated. The potential mechanism of action is stimulating the alpha-secretase pathway and Ach production in the brain both of which would have improvement in cognition. A Phase 2b trial should begin by mid-year with partner GSK. A 5HT-6 product is also in Phase I.
Alan Carr of Needham and Co. has a buy on EPIX considering that the Company has four mid-stage clinical programs and news drivers expected over the next six months.
RBC Capital also recently initiated an Outperform on the stock.
Myriad Genetics (MYGN)
Flurizan is a selective amyloid (amyloid beta 42) lowering agent that acts through a gamma-secretase pathway and has completed Phase 2 with 207 patients. Phase 3 is fully enrolled and underway.
A recent report by Decision Resources regarding Flurizan’s effect in delaying progression from mild cognitive impairment to AD will make it the “gold standard” for treatment. Launch is expected in 2010 with a 23% market share by 2016.
Ian Sanderson of Cowen and Co. has a forecast of $600M for Flurizan by 2012 and he expects it to be the first next generation drug to be approved by the FDA. Annabel Samimy of UBS has a buy on the stock considering the pipeline as well as the diagnostic business of the Company. Geoffrey Meacham Ph.D.of JPMorgan has an Overweight rating on the stock.
The Company is focused on a class of molecular targets called neuronal nicotinic receptors (NNR’s) that are involved in neurotransmitter activity potentially strengthening the nerve signal. Targacept’s lead compound selectively modulates specific NNR’s.The Company is partnered with AstraZeneca in a Phase 2b study with a small molecule drug AZD-3480 as a treatment for cognitive impairment in both AD and schizophrenia. Results are expected by the end of 2008. The AZD3480 compound has already been tested in 12 trials involving 540 subjects and was well tolerated and had positive effects in cognition.The Company has extensive IP for NNR and is also partnered with Glaxo for other NNR drug targets and additional IND’s are expected in Q2. Six analysts currently have buy ratings on TRGT: CIBC, Deutsche Securities, Leerink Swann, Lazard, Natixis and Pacific Growth.
Other companies with Phase 2 drugs in development are Prana and Medivation. Recently Prana (PRAN), an Australian Co., announced a successful Phase 2a trial for PBT2,, for safety and tolerability with reduced Abeta 42, a biomarker associated with AD. PB2 is an MPAC (Metal Protein Attenuating Compound) 8-hydroxyquinoline which can attenuate the damaging effects of amyloid beta by reducing the impact of naturally occurring metals such as copper.
Medivation (MDVN) announced recently that they would initiate a pivotal confirmatory Phase 3 trial of its Dimebon in Q2.The successful Phase 2 trial was done in Russia but the Phase 3 trial will be substantially in the U.S. Dimebon appears to block a new target that involves mitochondrial pores which are believed to play a role in cell death. Dimebon was previously approved and used in Russia as an antihistamine.
The market potential for Alzheimer’s Disease and related cognitive disorder therapies is huge due to the numbers of patients affected and the cost of care. The R&D investment and knowledge base is growing each year with several new therapies expecting positive data in 2009. Current products on the market are sold by larger companies such as Pfizer and Novartis as well as generic pharmaceutical companies so their stock prices are not very sensitive to sales growth. Many of the top tier drug companies also have products in clinical development for AD. Investing in small to mid-cap biotech companies offer the best growth potential albeit with clinical trial risk so we need Phase 3 data. As always a portfolio of products is the best approach with an overweighting of specific companies as positive clinical data gets confirmed. One other indicator of lower risk would be the creation of an ETF for companies in this sector such as the HHN Neuroscience ETF created by Xshares. Emerging companies that have encouraging Phase 2 data are mentioned above.
The first next generation product to market hopefully by the 2010-11 time frame will have multibillion dollar revenue potential.