Turning Cholesterol Into Cash

Last week, we took a close look at the $13 billion statin market. To recap, statins are cholesterol-reducing drugs that block the production of LDL (a.k.a. "bad cholesterol") by the liver. The reduction of cholesterol slows down (or sometimes completely stops) the formation of dangerous atherosclerotic plaques that can block arteries and cause heart attacks or strokes. Pfizer's (NYSE: PFE  ) Lipitor, Merck's (NYSE: MRK  ) Zocor, and Bristol-Myers Squibb's (NYSE: BMY  ) Pravachol are the top three statins, and newcomer AstraZeneca's (NYSE: AZN  ) Crestor is off to a quick start.

Many feel that the success of statins is just the tip of the cardiovascular iceberg for pharmaceuticals. Big Pharma's current efforts continue to focus on the modification of lipid profiles. Research has unearthed new targets for intervention that can either supplement or potentially supplant statins as first-line therapies against cardiovascular disease. Two drugs that foreshadow the potential of this field are Merck and Schering-Plough's (NYSE: SGP  ) Zetia and Esperion Therapeutics' (Nasdaq: ESPR  ) forthcoming ETC-216.

Zetia's punch to the gut
Despite their widespread use, statins are not for everyone. Many patients cannot tolerate the drugs' side effects, which can include muscle and joint pain or liver toxicity. For others, even the maximum dosage of Crestor or Lipitor (the most potent statins) is not enough to reduce their LDL to safe levels. Both of these patient populations could potentially benefit from Zetia, which reduces LDL by preventing its reabsorption in the intestine.

The body normally gets rid of cholesterol in a "two steps forward, one step back" technique. The liver modifies cholesterol and excretes it in the form of bile (i.e., two steps forward). Bile is released into the intestine, where it joins with unabsorbed dietary cholesterol (from the food you eat). This cholesterol then joins with other wastes from your body to be processed and excreted as stool. However, before the cholesterol is able to be excreted, it is hijacked by the small intestine, which reabsorbs roughly 50% of the cholesterol back into the bloodstream (one step back). Zetia blocks this reabsorption, resulting in a more effective removal of cholesterol from the body.

Zetia's novel mechanism of action makes it highly synergistic with statins. The effectiveness of statins varies from person to person, and is somewhat independent of dose. Although a greater dose will increase the power of the statin, an increase from a starting dose to a maximum dose of a statin will usually only reduce cholesterol by an additional 6% to 9%. In other words, doubling the dose of a statin will not double its effectiveness.

In contrast, the combination of Zetia profoundly amplifies the effect of statins. For instance, a 10 mg dose of Lipitor plus Zetia has been shown to decrease LDL more effectively than a 40 mg dose of Lipitor alone. This amplification can allow for effective treatment of patients who require significant decreases in LDL but cannot tolerate high doses of statins. Zetia can also be used as a stand-alone agent for patients who cannot (or choose not to) take statins.

A sum greater than its parts
Merck and Schering-Plough are collaborating to create a combination pill of Zetia and Zocor. The combined pill is critical for both companies. Schering-Plough is deep in a slump, and its new CEO is counting on Zetia to provide much-needed growth. Merck's pipeline has been decimated over the past year, and a combined pill would help ease the sting of Zocor's impending patent expiration.

The current hope at Merck is that the combined drug (which has been submitted to the Food and Drug Administration) will be approved soon, such that patients on Zocor can be switched to the new drug before Zocor expires and a cheap generic is available. Even if this switch is possible, the profits of the new drug will be split with Schering-Plough, dramatically reducing Merck's piece of the pie.

Many have speculated that Merck will take advantage of Schering-Plough's beaten-down stock to purchase the company and avoid splitting the proceeds of the new drug. However, given Merck's general reluctance to acquire or merge, such a move seems unlikely at best.

"Artery Drano"
In contrast to Merck, Pfizer has no qualms regarding mergers and acquisitions. Pfizer's $100 billion acquisition of Warner-Lambert in 2000 gave it full ownership of Lipitor, which it built into the world's best-selling drug. Since then, Pfizer has focused on developing its cardiovascular portfolio with drugs such as torcetrapib, which increases the production of HDL (a.k.a. "good cholesterol"). Torcetrapib is currently entering extensive phase III clinical trials that are rumored to cost more than $1 billion, a price tag that reflects Pfizer's confidence in the drug's potential. Analysts believe that torcetrapib may eventually have annual sales that rival Lipitor's. In addition, a combined Lipitor/torcetrapib pill is in the works.

Pfizer's relatively paltry $1.3 billion acquisition of Esperion Therapeutics gives Pfizer additional ammunition for its cardiovascular arsenal. Esperion's experimental ETC-216 could potentially be a revolutionary treatment for patients suffering from atherosclerosis.

Atherosclerosis is a "hardening of the arteries" caused by abnormal deposition of lipids and cells within the walls of arteries. This deposition is commonly referred to as a plaque. Over time, plaques can directly cause arterial narrowing or can rupture, leading to the formation of a clot that blocks the artery. In either situation, adequate blood flow is not possible, which can result in a stroke or a heart attack.

Statins aim to prevent atherosclerosis by reducing the amount of lipid (cholesterol) that is available to deposit in the arterial wall. Studies have shown that long-term use of statins can slow down or potentially halt the development of plaques. However, previously existing plaques remain, leaving the possibility of a deadly rupture.

That's where ETC-216 comes in. ETC-216 (I can't wait till they name this thing) is a synthetic version of HDL based on a natural variant that was found in residents of Limone sul Garda, a small town in northern Italy. Individuals with the variant HDL were found to have very low atherosclerosis and "apparent longevity." Esperion acquired the rights to the HDL and developed a method to create it in the laboratory. In November, Esperion published a very limited study that showed that intravenous ETC-216 administered once a week for five weeks decreased the size of their plaques by 4.2%.

Although the size of the study was very small, the results were very promising. Prior to ETC-216, arteries with plaques could be likened to shower drains clogged with hair. Statins (and other cholesterol-modifying drugs) would prevent further development of plaques, much like a shower drain cover could keep additional hair from adding to the clog. However, the fundamental problem (having a clog) could not be addressed. ETC-216 changes the game by introducing a Drano-like clotbuster that gets to the heart of the problem.

Pfizer and Esperion both gain from the merger. Esperion will gain the resources and development expertise of Pfizer, which will be able to quickly test and manufacture the drug. In addition to adding a potential blockbuster to the pipeline, Pfizer also gains the services of Roger Newton, the CEO of Esperion who was formerly one of the key developers of Lipitor.

The future
If ETC-216 and torcetrapib are shown to be effective, Pfizer will have a full array of treatments to deal with atherosclerotic disease. Patients who have had heart attacks (or are identified as having significant atherosclerosis) will be able to go to the hospital and receive treatments to decrease the size of existing plaques. Next, they will be able to take a combined Lipitor/torcetrapib pill that will prevent the problem from reoccurring. If Pfizer is able to come up with this range of treatment (a very big "if" at this point), it may be able to enjoy its position as the leader in cardiovascular therapy for many years to come.

However, even if all of Pfizer's drugs are successful, the company's plans of domination could be derailed by a new crop of treatments. Japan's Sankyo Pharmaceuticals is working on a drug that deals with cholesterol storage, and Eli Lilly (NYSE: LLY  ) and Ligand (Nasdaq: LGND  ) are collaborating on a drug that could potentially raise HDL and lower LDL simultaneously. Another challenge comes from AtheroGenics (Nasdaq: AGIX  ) , a small biotech that is bypassing cholesterol altogether and focusing on treating cardiovascular disease by reducing cardiac inflammation. Only time, hard work, and billions of dollars of research will be able to separate the winners from the losers.

Arash Mostaghimi, a guest writer for The Motley Fool, is a student at Harvard Medical School. He also runs a tutoring company in Boston, www.RagingKnowledge.org. He enjoys receiving feedback via email.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 493380, ~/Articles/ArticleHandler.aspx, 8/31/2014 6:33:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement