‘Warehoused’ Hepatitis C Patients May Boost Merck, J&J, Vertex

‘Warehoused’ Hepatitis C Patients May Boost Merck, J&J, Vertex
April 18, 2010, 8:37 PM EDT

April 19 (Bloomberg) -- At Fred Poordad’s bustling hepatitis C clinic in the heart of Los Angeles, one in every five patients receives no treatment. They are waiting for a wave of new drugs, expected in the next 18 months, that may boost their chance at a cure by as much as 10-fold.

The medicines also may bolster the prospects of Merck & Co., Vertex Pharmaceuticals Inc. and Johnson & Johnson, the companies in a race to get the first new treatment to the market in a decade. About half of patients can’t tolerate the side effects of existing therapies, which generate $2 billion annually in sales. The new drugs could expand the market to $10 billion in five years, said Geoff Porges, an analyst for Sanford C. Bernstein & Co. in New York.

They’re just the first among new therapies anticipated in the next five years as companies seek a single pill to cure the infection. Poordad, chief of hepatology at the Liver Disease and Transplant Center at Cedars-Sinai Medical Center in Los Angeles, doesn’t object when his patients elect to wait for the new drugs, a practice known as “warehousing.”

“The warehousing has been going on for the past year or so,” Poordad said. “I think we’ll see a tremendous increase in the volume of patients that are treated. That’s the most exciting thing in the field for a long time.”

The drugs closest to market, Merck’s boceprevir and telaprevir from Vertex and Johnson & Johnson, are protease inhibitors crafted from the technologies that led to discoveries made in the fight against HIV. The new treatments are being tested as additions to current standard treatments. Both drugs work by blocking the action of the protease enzyme the hepatitis virus needs to replicate, directly stopping it from spreading.

Available by 2011

Merck, of Whitehouse Station, New Jersey; Vertex, based in Cambridge, Massachusetts; and its partner Johnson & Johnson, of New Brunswick, New Jersey, have said they expect results from final-stage clinical trials by the second half of 2010, with submission to U.S. regulators by year-end. Patients can expect the drugs to be available by 2011, executives said on April 16 at the annual meeting of the European Society for the Study of the Liver in Vienna.

“We’re on the brink of a revolution,” Porges said in an interview at the conference. “Investors have been waiting for this for six to seven years, and investigators and physicians have been waiting for almost 10 years.” He has an “outperform” recommendation on Vertex and sees the stock gaining 23 percent in the next year.

Vertex shares rose 0.8 percent to $39.99 in Nasdaq Stock Market trading on April 16. The stock has gained 43 percent in the last year.

Scarring Livers

Most of the 170 million people infected worldwide with hepatitis C don’t know they’re sick, while others fail to respond to existing drugs or can’t tolerate their side effects. The virus is spread by contact with infected blood. About 4 million Europeans and 3.6 million Americans have the disease, and only about 2 percent get treatment, according to Merck.

The illness moves slowly, scarring livers over years or decades, giving doctors and patients a window of time. Once the liver is destroyed, however, patients face cancer or organ failure, with few effective treatments other than a transplant.

The current standard of care is a combination of the generic antiviral pill ribavirin and interferon, an injection sold by Merck as Pegintron and Swiss drugmaker Roche Holding AG as Pegasys. The medications beef up the immune system, helping it clear the virus from the patient’s blood. They can also trigger anemia or make patients feel like they have a never- ending flu. The new drugs don’t erase those side effects but can cut treatment time in half, from a year to about six months.

Rush for Treatment

The protease inhibitors may have the biggest impact in those who have failed prior therapy. Five to 9 percent of them are cured by a second course of treatment with existing drugs. Adding a protease inhibitor appears to boost that number 10- fold, said Poordad, who has participated in studies funded by Merck, Vertex and Johnson & Johnson.

The first two or three new drugs will take the lion’s share of the growing market, Porges said, as warehoused patients rush to get treatment and doctors establish a new standard of care.

Vertex and Johnson & Johnson hold an advantage right now, Porges said, because their drug telaprevir doesn’t cause the same levels of anemia seen as a side effect of its competitor from Merck. Vertex also allowed patients who didn’t respond at all to other therapies into its clinical trials, possibly positioning its drug, which has been in development for at least 12 years, for broader use.

“We think that’s going to be an advantage,” said Bob Kauffman, chief medical officer at Vertex.

Billion-Dollar Business

Hepatitis C is already a billion-dollar annual business for Merck and will drive growth, said Patrick Bergstedt, the company’s senior vice president for vaccines and infectious diseases. The drugmaker acquired most of its treatment franchise in the $41 billion purchase last year of Schering-Plough Corp.

The three drugmakers lead a packed field of competitors. A half-dozen other approaches to curing the disease are in development, with about 30 compounds being studied.

At the liver conference in Vienna, the 1,000-seat conference room devoted to new drug development was overflowing. Doctors, researchers and investors lined the walls and sat in aisles as eight investigators presented data about the second wave of therapies following on the new drugs’ heels.

Among the most exciting are polymerase and NS5A inhibitors, compounds that also block viruses from replicating, said Heiner Wedemeyer, leader of the gastroenterology, hepatology and endocrinology department at Hannover Medical School in Germany.

‘Major Breakthrough’

Though the three categories of compounds all prevent viruses from copying themselves, they work in slightly different ways. Doctors hope that using them together could prevent patients from becoming resistant, a common problem with viral treatments, Kauffman said.

“Now there is light on the horizon,” Wedemeyer said, adding that the first studies to combine only pills, without the side-effect-laden injections, are under way. “If this treatment really works, with no resistance emerging, it could be a major breakthrough.”

Investigators aim in five or 10 years to be able to treat hepatitis C with just one or two pills, Bergstedt said. No one company has all the pieces of the puzzle in development yet, he said. They’re looking aggressively for partnerships on experimental compounds.

“We’d be stupid not to,” the Merck executive said. “Everybody’s talking to each other. Nobody really has all the assets at this stage, and everybody’s starting to position and starting to accumulate.”

At the Vanguard

Bristol-Myers Squibb Co. is at the vanguard of the next transformation, said Howard Liang, a Boston-based analyst for Leerink Swan & Co. While the New York-based company’s drugs are still in the early stage of development, it’s taking a daring approach by combining two of its oral medicines in a cocktail without interferon -- potentially leapfrogging competitors whose individual therapies are further along.

Bristol’s lead treatment is one of the first NS5A inhibitors. Roche and Gilead Sciences Inc. are also aiming for oral combination drugs, and it’s essential to be one of the first, he said.

The goal may be to get good enough results by the time the Merck and Vertex drugs are introduced next year to prompt a second wave of patient warehousing, Liang said.

“If you are Bristol or Roche, and you know you are behind, you aren’t going to catch the initial bolus,” he said. “What you try to do is get some data and say, ‘Look, we have something better on the horizon. Don’t treat everybody. If you can wait, wait.’”

--Editors: Phil Serafino, Kristen Hallam