Stocks That Make You Breathe Easier

I just got back from the vet, where my Australian shepherd, Blue, kicked off his usual summer regimen of cortisone shots, antihistamines, and maybe some oral prednisone. Something about summer in Oregon disagrees with Blue and makes him itch badly. Maybe it's something that grows in the summertime; maybe it's just that the drizzle that usually tames the particulates in the air has finally dried up. I really don't know.

But Blue has millions of human counterparts around the world -- folks with various seasonal allergies that can turn beautiful summer days into runny-nosed, watery-eyed sneeze fests. It's no accident that the Schering-Plough allergy drug Claritin was once the most heavily advertised prescription drug in the world, or that it brought in $3.2 billion in sales in 2001 before going over-the-counter the following year.

While it hasn't been quite the same since the glory days of Claritin, the allergy market is still big business. Allegra and Zyrtec were both in the top 40 of worldwide drug sales last year, according to NDCHealth, with sales of $1.5 billion and $1.3 billion, respectively. According to the National Institute of Allergy and Infectious Diseases (NIAID), 9% to 16% of the U.S. population suffers from allergic rhinitis (a.k.a. hay fever). Yet all the drugs you see advertised on TV offer marginally different ways of accomplishing the same biological strategy: to stop the histamine circulating throughout your body from binding anywhere it can cause trouble.

However, sometimes antihistamines aren't enough. Some folks have a chronic response to allergens that antihistamines just can't alleviate. And people with allergic asthma don't just get watery eyes and a runny nose -- they can suffer a dangerous airway constriction. There is a big market out there for drugs that can treat the more severe forms of allergies and asthma, and dozens of companies are scrambling to release new products.

Asthma and allergies are closely linked. While the exact causes of asthma are unknown and appear to involve both hereditary and environmental components, about three-quarters of people with asthma also suffer from allergic rhinitis. A typical drug regimen for many asthmatics involves allergy medication as well as the two mainstays of asthma therapy: corticosteroids and beta-agonists. The World Health Organization estimates that as many as 150 million people worldwide suffer from asthma, and the number is growing rapidly. Around 60% of asthma is linked to airborne allergens.

New opportunities in asthma and allergies
People with allergic asthma who are struggling to control symptoms and live a normal life despite an arsenal of drugs have one important new option, and more will follow. The Genentech (NYSE: DNA  ) and Novartis (NYSE: NVS  ) drug Xolair has a novel mechanism of action, blocking IgE, one of the immunoglobulins involved in human immune response. Launched in 2003, sales of Xolair have picked up quickly, coming in at $189 million in 2004. Since Genentech and Novartis share revenue after paying a royalty to Tanox (Nasdaq: TNOX  ) , that's still small potatoes for the companies' bottom lines. But as this novel therapeutic approach catches on, Xolair could still potentially achieve blockbuster status . unless something better comes along, that is.

Xolair works very well, but it has a few drawbacks. One of the obstacles to more widespread adoption is its expense: $10,000 or more annually. As a monoclonal antibody, Xolair is relatively difficult and expensive to manufacture. It also requires injections every two weeks or so. An inhaler in your back pocket it ain't.

With the huge markets represented by severe allergies and asthma, it's no surprise that this is fertile ground for drug research. But take a glance at the table below -- which is by no means intended to be an exhaustive list of drugs in development -- and you may notice something a bit unusual. This is a far cry from other areas of drug research, where a cluster of companies will race to make different molecules for the same biological target. In fact, it seems like there are almost as many asthma targets as there are drugs in development -- companies going after numerous different points in the complex immune cascade that results in the asthma symptoms.

That's not so surprising. As pulmonologists are fond of saying, asthma is a syndrome, not a disease. People get the symptoms of asthma for very different reasons. They have different responses to drugs, and for severe asthma, multi-drug therapy is the rule. That means a crowded field of drug research makes sense; there is room for several potentially complementary therapies. But for an investor looking to get in early on emerging new therapies, it's tough to call a winner.

Perhaps one of the most interesting companies to watch in this space is Rigel (Nasdaq: RIGL  ) , which is in phase 2 development of its Syk kinase inhibitor R112. I find this program intriguing for a few reasons. One, it is an anti-IgE approach, ultimately accomplishing the same thing Xolair does, albeit by a different mechanism. Thus, the strategy, if not the exact mechanism, is clinically and commercially validated. That's a big comfort in a field where companies are looking to block a baker's dozen of different interleukins in hopes of finding an effective asthma treatment.

Second, R112 offers a number of potential advantages over Xolair. It is a small-molecule treatment given by intranasal inhalation. Because it is much cheaper to manufacture, the company should be able to price R112 much lower than Xolair and still keep up those staggeringly high drug margins that investors love. And while there is limited clinical data available on R112, what is available is encouraging. A phase 2 study of 319 participants suffering from allergic rhinitis saw significant reductions in a complex of allergy symptoms (sneezing, runny nose, congestion, itchy nostrils, etc.) when exposed to allergens in a park setting.

Rigel recently partnered with Pfizer on its Syk kinase program, forging a development agreement on drugs for asthma and chronic obstructive pulmonary disease (COPD). The company kept rights to R112 for allergic rhinitis, however, although Pfizer has an option to license that compound on different terms at a later date.

Selected asthma drugs in development

Company

Drug (target)

Status

IsisPharmaceuticals

ISIS 369645 (Antisense inhibitor of the IL4 receptor alpha)

preclinical

Rigel

R112 (Syk kinase inhibitor to block IgE receptor signaling, for allergic rhinitis)

phase 2

CambridgeAntibody Technology

CAT-354 (antibody against IL-13)

phase 1

CV Therapeutics

CVT-6883 (Adenosine A2B receptor antagonist)

phase 1

Wyeth

Efipladib (cPLA2 inhibitor). Also in development for severe pain.

phase 2

Altana (NYSE: AAA  )

Daxas (phosphodiesterase-4 inhibitor). Altana secured all rights this month after Pfizer dropped a partnership.

phase 3

deCODEGenetics (Nasdaq: DCGN  )

(MAP3K9 kinase inhibitor)

phase 2

GlaxoSmithKline

SB 656933 (IL8/CXCR2 receptor inhibitor)

preclinical



I'm also intrigued by CV Therapeutics (Nasdaq: CVTX  ) -- a recommendation of the Motley Fool Rule Breakers newsletter -- which recently made a foray into the asthma field. As its name implies, CV has focused on cardiovascular drugs up until now, but this new program is, in fact, a natural extension of its research. The drug it is advancing into phase 1 trials is an adenosine A2B receptor antagonist.

Adenosine is a nucleoside that is often used to control certain forms of heart arrhythmias and tachycardia. For instance, a company called Astellas Pharma markets a treatment called Adenoscan, an adenosine injection used to temporarily simulate the effects of exercise for certain heart tests. But it can also cause constriction of the air passages and is therefore not recommended for asthmatics.

One of CV's late-stage products, Regadenoson, was designed to avoid some of the shortcomings of Adenoscan by acting specifically on a subtype of the adenosine receptor A2A, while avoiding the more troublesome A2B receptor. The company's new compound is going after the other side of the same coin -- blocking an adenosine A2B response in people with asthma to prevent or control attacks. It is, of course, far too early to say whether this will work, but it will be an intriguing program to watch.

If these or some of the other drugs in development pan out, patients with severe allergy and allergic asthma will have a better chance of facing summer undaunted. And luckily for Blue, if his current treatment regimen fails to control his itching, we have a highly effective backup: putting a cone over his head.

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Karl Thiel doesn't have a financial interest in any company mentioned in this article. The Motley Fool has an ironclad disclosure policy.


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