Could Isis Threaten Regeneron and Novartis?

Regeneron (NASDAQ: REGN  ) and Novartis (NYSE: NVS  ) enjoy little competition for their vision-improving drugs Eylea and Lucentis. As a result, sales of Eylea grew to more than $1.8 billion last year, just two years after winning FDA approval in 2011, and sales of Novartis and Roche's (NASDAQOTH: RHHBY  )  Lucentis, which was first approved in 2006, have climbed to more than $4 billion a year.

Those successes have sparked the attention of drug developers hoping to cash in on the lucrative and growing market. One of those developers, Isis Pharmaceuticals  (NASDAQ: ISIS  ) , developed iCo-007, a drug currently being studied in mid-stage trials as a treatment for a form of vision loss caused by diabetes.

Improving the lives of diabetics
The drug has just completed phase 2 trials as a treatment for diabetic macular edema, or DME, the most common cause of vision loss in people with diabetes, and results from the trial are expected to be announced in April.

The market for DME is big and, unfortunately, growing every year. There are about 1 million cases of DME in the U.S., and more than 300,000 new cases are diagnosed annually.

DME is the most common form of vision loss in patients with eye disease caused by diabetes. Over the course of their lives, more than 80% of all diabetics will suffer from some form of eye disease, with about 30% of all diabetics eventually being diagnosed with DME. 

Currently, the majority of these patients are either treated with Novartis' Lucentis' or with Roche's Avastin, a drug that's most commonly associated with treating cancer, and that racks up more than $6 billion in annual sales globally.

That makes Lucentis, which won FDA approval as a DME therapy in 2012, the top-selling drug specifically approved to treat DME. That may change, however, given the FDA is expected to approve Eylea for the condition in August.

Isis' potential solution
While it is years away from posing a threat to Lucentis or Eylea in the DME indication, iCo-007 may offer patients a new treatment option. The drug targets an enzyme, c-Raf kinase, associated with the formation of blood cells that can leak into the retina and cause vision loss in DME patients.

By inhibiting c-Raf kinase, iCo-007 hopes to thwart the disease downstream of growth factor VEGF, which is the target of both Lucentis and Eylea.  

Isis licensed iCo-007 to iCo Therapeutics in 2005, and results from a small phase 1 trial released in 2010 show iCo-007 was well tolerated at 24 weeks, producing stable or improved vision in 13 of the 15 patients. 

That prompted iCo to move the drug into phase 2, where it is studying iCo-007 as both a solo treatment dosed monthly, and a combination treatment delivered alongside Lucentis.

If iCo-007 results in this trial are compelling enough, iCo will pay Isis a small $4 milestone payment if it advances the therapy into phase 3. Much further down the road, a successful phase 3 trial and possible commercialization could benefit Isis in a couple of ways. Isis not only owns 6% of iCo Therapeutics, but it may receive up to $40 million in regulatory milestones, as well as eventual royalties on any sales. 

Fool-worthy final thoughts
Thanks to partnerships with big and small drug developers, Isis has about 20 different compounds in phase 2 and phase 3 trials, may of which industry watchers have higher hopes for than for iCo-007.

However, if iCo-007 succeeds in phase 2, investors are likely to start paying more attention to how the compound could eventually benefit Isis. Especially since the number of diabetics globally is expected to grow from 365 million in 2011 to 552 million in 2013. Currently, roughly three new cases of diabetes are being diagnosed every 10 seconds. 

Regardless of the size of the market opportunity, investors should view iCo-007 only as a highly speculative and distant threat to Regeneron and Novartis. After all, even if the drug moves into phase 3, which it might not, it would still be years away from reaching the market. That suggests Eylea and Lucentis still have plenty of running room ahead of them. 

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