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Biotech Targets Diabetes

08/13/2004 12:00 am EST


John McCamant

Editor, Medical Technology Stock Letter

One of the most fascinating aspects of the Medical Technology Stock Letter is when editor John McCamant provides an in-depth analysis of a specific disease, and then discusses biotech investment implications. Here he looks at diabetes.

"Diabetes facts never fail to get our attention. Consider the following:

  • 18.6 million Americans have diabetes.
  • Over five million of these are undiagnosed.
  • Diabetes is the leading cause of blindness in adults.
  • More than 60% of non-traumatic lower-limb amputations are attributable to diabetes.
  • Diabetes is the fifth leading cause of death by disease in the US.
  • In 2002, diabetes-related costs totaled $132 billion in this country, including $91.8 billion in direct medical costs and $39.8 billion in indirect costs (lost or restricted workdays, permanent disability, etc.).
  • One in seven US healthcare dollars is spent on the treatment of diabetes and its complications.
  • By 2011, there will be an estimated 48.1 million diabetics in the seven largest pharmaceutical markets worldwide.

"As background, we’d note that the metabolic system converts food into energy and growth. In healthy people, most digested food is transformed into a simple sugar called glucose, which first enters the bloodstream, then travels to the cells through the action of the hormone insulin. Diabetes is a metabolic disorder characterized by too much glucose in the bloodstream. Elevated levels of glucose in the bloodstream can lead to a number of serious health problems. Type 1 diabetes is the most prevalent serious chronic disease experienced by children in this country. The body attacks and destroys the islet cells in the pancreas. In order to survive, they must take in insulin from external sources. Type 2 diabetes is the most prevalent variety, accounting for 90–95% of all cases. It usually begins as increasing cellular resistance to insulin. As the need for insulin rises, the pancreas works overtime to produce more insulin, and gradually loses its ability to do so.

"The purpose of current treatments is twofold: control glucose levels and reduce the risk of diabetic complications. Insulin is the oldest class of antidiabetic treatments. Developing new antidiabetic therapeutics is risky business. But the need for new antidiabetics is great, and the opportunities for investors are significant. Since most players in this arena are large pharmaceutical companies, treating diabetes is but a portion of their diversified whole. For some biotech companies, however, the diabetes potential makes up a large part of their market capitalization. Here are three companies we believe have great potential in this area.

"Amylin (AMLN NASDAQ) and partner Lilly recently filed a new drug application (NDA) for exenatide, which is the first in a new class of antidiabetics known as incretin mimetics being investigated for the treatment of type 2 diabetes. (The clinical road began in January 1999 with the filing of the IND. Phase III trials were completed last November.) Patients treated with exenatide in addition to conventional oral medications saw a reduction in blood glucose levels. The results are better than those exhibited by Actos and Avantia, both billion-dollar drugs. If the NDA goes through the FDA without a hitch—and based on the data, we think it should—then the drug will enjoy a first-to-market advantage over the other potential competitors from this new class of drugs for type 2 diabetes, which is a good thing. The represents further evidence of the continued fundamental progress that AMLN has been making over the years, and as a result of the filing, the company is even more attractive than it already was. Thus, this stock represents a solid investment opportunity at current levels.

"The downside for exenatide is that it is an injectable competing with oral medications. For this reason, Amylin/Lilly along with Alkermes (ALKS NASDAQ) are developing exenatide LAR, the long-acting release formulation of exenatide. Monthly dosing is the goal. A 60-patient Phase II trial is currently testing concentrations of different doses of exenatide in the bloodstream over time. We expect results from this trial before the end of the year. Larger dose-ranging trials would be next, prior to pivotal testing.

"Isis (ISIS NASDAQ) is also partnered with Lilly on an innovative diabetes program. The lead drug in the program is ISIS 113715, a second-generation antisense compound which is in Phase II development. This is an open-label, dose-escalation trial to evaluate the drug's ability to regulate blood glucose levels in type 2 diabetes patients. Phase I results showed the drug to be well tolerated, and that it did not result in hypoglycemic events. ISIS 113715 targets PTP-1B, an enzyme that appears to reduce insulin’s ability to regulate blood glucose levels. Inhibiting PTP-1B may allow insulin receptors to stay active longer, transferring more glucose from the bloodstream to the cells. In addition to its diabetes research, Isis is going to get a $1 million milestone payment from Eyetech Pharmaceuticals; the payment is in relation to Eyetech’s filing for marketing approval of Macugen, their treatment for wet age-related macular degeneration. In addition, down the road, ISIS is going to get a royalty on Macugen sales if it ends up getting approved by the FDA. While the royalty is going to be a small one, it nonetheless represents a good example of ISIS extracting value from their extensive patent portfolio."

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