Lots of people on Wall Street are hyped up about new treatments for hepatitis C from Vertex Pharmaceuticals and Schering-Plough. But a little-known drug in development from Seattle-based ZymoGenetics (NASDAQ: ZGEN) could steal a bit of thunder, and possibly ride the wave of enthusiasm those companies are creating among doctors and patients.
Hepatitis C, a deadly liver infection, has made headlines in the past year, as Vertex (NASDAQ: VRTX) and Schering-Plough (NYSE: SGP) have both shown that protease inhibitors in development can roughly double the cure rate over the standard of care. An estimated 6 million people in the U.S. and Europe have chronic hepatitis C infections, so the opportunity is huge, possibly worth $2.6 billion for Vertex alone by 2013, says Rachel McMinn, an analyst with Cowen & Co. in San Francisco.
One catch here is that both the Vertex and Schering-Plough drugs must be taken in tandem with the standard of care—a regimen that consists of pegylated interferon alpha and ribavirin. That backbone of therapy causes flu-like symptoms, depression, and anemia, and it must be taken for almost a year. That means most patients opt against getting treatment at all, says ZymoGenetics president Doug Williams. Instead of developing another protease inhibitor to be taken in addition to the standard of care, ZymoGenetics has developed an alternative that has the viral killing power of interferon alpha, without causing the side effects. It calls its version of the standard of care “pegylated interferon lambda,” or IL-29.
“Interferon based regimens are the backbone of therapy and they will continue to be for the forseeable future, and we have one with a better tolerability profile,” says Williams, an Xconomist.
This wasn’t immediately obvious from the start at ZymoGenetics, which has bet much of its research and development budget in recent years on atacicept for autoimmune diseases and IL-21 for cancer. Earlier this month, it handed over its partial stake in atacicept to its partner, Merck KGaA to save cash, while its lone marketed product struggles to find a footing in the marketplace. ZymoGenetics hasn’t talked much about the peg-interferon lambda program in the past, so it was striking to hear Williams say it wants to pour more of its resources into this program. Besides some promising clinical trial data that’s rolling in, there are a couple of strategic business reasons to do this. For one, ZymoGenetics stills owns a 100 percent stake in the product, so it has some bargaining leverage to work with. And two, it believes it is the only company with an improved interferon in clinical trials.
“The sleeper here is starting to wake up,” Williams says.
Results from a 20-patient clinical trial, presented at the European Association for the Study of the Liver in April, showed that the ZymoGenetics drug candidate didn’t cause the widespread immune-system activation that causes the side effects with the standard drugs. That study was in healthy volunteers, and the company needs to confirm that finding in patients with hepatitis C.
More results from the ZymoGenetics drug, and its ability to kill viruses, will be available in November at the American Association for the Study of Liver Disease meeting in San Francisco, Williams says. An early peek of data from the first six patients, who got one of the lowest doses in testing, shows antiviral activity in four of them, according to an abstract of the data that company spokeswoman Susan Specht sent me in an email. Data from three cohorts of patients will be presented at the liver meeting, she says.
The company is clearly setting some high expectations heading into that meeting. ZymoGenetics CEO Bruce Carter said that the company’s most important strategic move of the past year was to hold on to pegylated interferon lambda, rather than sell it off, according to an August interview with Biotech Stock Research, an independent equity research firm in Seattle. “Now we see it as an important investment,” Carter said.
ZymoGenetics has said it plans to find a partner to help with the final stages of development of this drug, and if the data presented in San Francisco back up what it’s been saying, then the price will surely be going up. Just don’t count on it making much of a splash in the news, as ZymoGenetics will surely be overshadowed by the folks at Vertex and Schering-Plough.
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