Sun Feb 9 05:53:10 2003
Arthritis Treatment in Transition
By Ransdell Pierson
NEW YORK (Reuters) - A potential breakthrough arthritis drug has raised the profile of Scios Inc., considered a step ahead of rival drugmakers racing to develop similar pills and to pit them against today's blockbuster injectable treatments.
Shares of Scios SCIO.O soared Friday on reports it is in talks to be acquired by Johnson & Johnson JNJ.N and that J&J might be willing to pay up to $2 billion for the Sunnyvale, California-based biotech company.
Industry analysts said the immediate draw for J&J is Scios' two-year-old drug for heart failure, called Natrecor, that is expected to eventually garner annual sales of over $500 million.
But J&J would also acquire an experimental Scios pill for rheumatoid arthritis, called SCIO-469, that could become a far bigger product if it is approved. It is currently in Phase II clinical trials and perhaps years away from proving whether it is safe and effective.
The pill works by blocking the p38 kinase enzyme, whose chemical messages stir up inflammation-causing proteins such as tumor necrosis factor (TNF) and COX-2.
Scios said it is in talks with a number of companies about strategic transactions. Those transactions could involve a merger or a partnership to develop SCIO-469, the company said.
Johnson & Johnson declined to comment.
"The p38 kinase target is major, and most of Wall Street hasn't woken up to that yet," said Richard Stover, an analyst for Arnhold & S. Bleichroeder. "That therapeutic approach is one of the most exciting things going on in the pharmaceutical industry today."
Besides taming arthritis, Stover said p38 kinase drugs might also prove effective in treating heart problems by inhibiting C-reactive protein, an inflammation-causing substance many doctors now believe is more harmful to the heart than cholesterol.
"The Scios drug could become a $2 billion-a-year product in the best-case scenario, if it is the first-approved p38 kinase inhibitor and works against both TNF and COX-2," said SG Cowen Securities analyst Philip Nadeau.
MANY IN THE HUNT
Many other drugmakers are in earlier stages of developing p38 inhibitors to treat arthritis, including Cambridge, Massachusetts-based biotech Vertex Pharmaceuticals Inc. VRTX.O , London-based GlaxoSmithKline Plc GSK.L , Japanese drugmaker Sankyo 4501.T and Woburn, Massachusetts-based biotech ArQule Inc. ARQL.O .
Safety problems, including toxicity to brain cells of laboratory animals, have killed previous such drugs -- including one developed by Vertex.
"Although safety concerns have tripped up previous p38 candidates, there's a good chance somebody will get one of these drugs to market. And that will cause a lot of excitement," Nadeau said.
Rheumatoid arthritis, which affects an estimated one percent of the population, is a genetic disease in which the immune system becomes overstimulated and attacks the body's joints.
Two of the best-selling drugs for the disorder are Amgen Inc.'s AMGN.O Enbrel and Johnson & Johnson's Remicade, which both target tumor necrosis factor and each have annual sales of about $1 billion. Abbott Laboratories Inc. ABT.N won approval in December for Humira, an anti-TNF drug it expects will bring in eventual annual sales of $1 billion.
Although highly effective, all three anti-TNF drugs must be injected -- a hassle that could play to the favor of more-convenient p38 kinase pills if any are approved.
"An oral drug that shows the same effectiveness as injectables would be a huge home run," said John McCamant, executive editor of the Medical Technology Stock Letter.
Pharmacia Corp's PHA.N Celebrex and Merck & Co's MRK.N Vioxx, pills which have combined annual sales of more than $5 billion, both treat rheumatoid arthritis and osteoarthritis by blocking the COX-2 protein.
Although most p38 kinase drugs are being developed to treat rheumatoid arthritis, McCamant said they could eventually also prove effective against osteoarthritis -- the most common form of arthritis which is caused by wear and tear of the joints.
Scios closed up $7.51, or 22 percent, to a 52-week high of $42.20 Friday on the NASDAQ. (Additional reporting by Jed Seltzer and Toni Clarke)
Key(s): Scios Merck ArQule Amgen Abbott Laboratories Vertex GlaxoSmithKline
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